Actively managed ETFs are on a path to overshadow passive offerings as ETFs continue to gather momentum among advisors and investors, according to Cerulli Associates.

“Active management is the next logical step” in the growing popularity of ETFs and it is more interesting for advisors, money managers and investors, Daniil Shapiro, associate director at Cerulli said in an interview.

This year will be a transitional period for active ETFs, according to new research by Cerulli.. ”ETF industry participants are adamant that the active ETF opportunity, more so than the strategic beta or passive ones, is currently the most significant” area of investment and growth, the report said. “As managers look to bring active product to market, they should continue monitoring the various approaches to launch and understand the tradeoffs associated with each” strategy."

The research was based on information from 30 ETF issuers representing 90% of the ETFs issued.

“There are a lot of passive ETF products out there, but by using active ETFs, advisors and money managers can offer their expertise to clients,” Shapiro said.

The research showed that 70% of ETF issuers are either currently developing or planning to develop transparent active ETFs. “With $266 billion in assets encompassing multiple asset classes and a consistent growth trajectory, transparent active ETFs are already a well-built category,” Cerulli said in the report. “However, out of the $104 billion in active equity exposures through ETFs, only a sliver is in true active equity products given that a significant portion is allocated to thematic and strategic-beta-like offerings.”

Converting mutual funds to ETFs can serve as an avenue for managers to utilize active ETFs in some instances, if it fits a particular investor, but the conversion process is complex, Cerulli said.