Why First-Mover Advantage Matters for the Best Active ETFs

Bar chart of global active and passive ETF assets under management from 2014 to 2024

First-mover advantage matters in active ETFs because product age can reveal more than headline marketing. A fund that has been live through multiple market regimes gives investors a better window into how the manager actually applies the process, handles risk, and communicates changes. For long-term allocators, that can be more useful than a short launch history built around a single environment.

One practical angle is methodology consistency. In active ETFs, the key question is not simply whether the strategy is โ€œactive,โ€ but whether the portfolio construction rules are repeatable and understandable. Investors should look for clarity around benchmark awareness, position sizing, turnover, and how quickly the manager can adapt when fundamentals shift. A durable process is often easier to evaluate when it has been tested over time.

Structure also matters. ETFs can trade differently from the underlying portfolio, especially when a strategy uses less liquid securities or a more concentrated book. Older, better-established funds may offer more evidence on spreads, authorized participant activity, and whether the vehicle has remained efficient as assets grew. That history can help investors judge how well the wrapper itself supports the strategy.

For portfolio construction, seasoned active ETFs can play a useful role as long-term building blocks rather than tactical bets. The goal is not to chase the newest launch, but to assess whether the fund can complement existing exposures, maintain its style discipline, and remain practical to hold through a full cycle. In that sense, first-mover status is less a badge of novelty than a signal worth examining alongside fees, liquidity, and process transparency.

The ETF industry has been growing for decades, but its spike, and the spike of active ETFs particularly in recent years, is hard to overstate. 2026 has seen continued record-setting pace for ETFs, with active ETFs contributing 80% of launches YTD as of May. That widening pool challenges investors to find the best ETFs.

Key Takeaways:

  • Active ETFs have grown massively in recent years, driving some 80% of YTD launches as of May.
  • When assessing those funds as options, however, not many have that key three-year track record.
  • First-mover advantage among active ETFs can help find enduring, durable performance where it counts.
Certainly, performance comes first. What happens, however, when a fund only has limited performance data? Especially in the active ETF space, track record can say a lot about an asset managerโ€™s approach and its rate of success. Thatโ€™s why a first-mover advantage can prove a decisive one when it comes to finding the best ETFs. Take, for example, a fund like the American Century Focused Dynamic Growth ETF (FDG). FDG launched back in 2020 and has outperformed the ETF Database Large Cap Growth Equities category average over the last five-, three-, and one-year periods. Over the last three years, it has returned 27.7%, compared to the averageโ€™s 18.45%. VettaFi recently sat down with American Century Investments head of ETF product and strategy Sandra Testani to discuss. She expanded on the strength of that first mover advantage in the active space. About 60% of the more than 2,000 active ETFs on the market lack a three-year track record, she said. She emphasized the โ€œseasoningโ€ of the issuerโ€™s active ETFs, by contrast, like the American Century Diversified Corporate Bond ETF (KORP). โ€œWhen American Century launched KORP in 2018, the total U.S. active ETF market was valued at just $500 million,โ€ she said. โ€œToday, that market has exploded to approximately $1.8 to $1.9 trillion in the U.S. alone.โ€ The fund, she added, has a 5-star rating from Morningstar. That backs up its status as one of the longest operating and largest active corporate bond ETFs. KORPโ€™s status among the top ETFs in the active corporate bond space includes its outperformance versus the ETF Database Corporate Bond ETFs category average in that time. Investors may be well advised to look to first-mover advantage when looking for the best strategies. Those funds not only can back up their strategies with performance, but also can claim the managerial experience to boost it further.

https://www.etftrends.com/core-strategies-content-hub/first-mover-advantage-matters-best-etfs/

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