Yield-Focused and AI-Curated ETFs Reshape Investment Strategies

Surging ETF Inflows and the Rise of Active Management

In 2025, exchange-traded funds (ETFs) are enjoying unprecedented popularity, with net inflows reaching a staggering $620.54 billion globally in just the first four months of the year. This marks the 71st consecutive month of net inflows, according to ETFGI. North America remains the dominant region, buoyed by investor enthusiasm for active ETFs.

Active ETFs in particular are capturing a growing share of the market. In 2024 alone, 934 new ETFs were launched, with a notable 78% being actively managed. As of Q2 2025, active ETFs have seen inflows of over $336.6 billion, surpassing previous records and pushing their collective assets under management past the $1 trillion threshold.

This surge highlights a growing investor preference for more tactical and flexible investment approaches amid economic uncertainty. With inflation, interest rate fluctuations, and geopolitical instability remaining top of mind, fund managers and retail investors alike are seeking performance strategies that outperform passive benchmarks.

Covered-Call ETFs and Custom AI Portfolios Gain Momentum

Among the standout performers this year are covered-call ETFs like JPMorgan’s JEPI and JEPQ. These income-generating funds have gained traction with yield-hungry investors looking for downside protection in sideways or slightly bullish markets. JEPI currently offers an 11% yield, while JEPQ tops 15%, making them attractive to retirees and income-focused portfolios. JEPQ alone has attracted $6.1 billion in 2025 inflows, signaling strong investor appetite despite capped upside potential during bull runs.

However, these strategies come with trade-offs. As Barron’s points out, the capped gains may cause underperformance during market rallies—something investors should weigh against the consistent income appeal.

At the same time, technology is rapidly transforming the ETF landscape. AI-driven platforms like Public’s Generated Assets allow users to create personalized portfolios tailored to specific themes or strategies. These tools challenge the necessity of traditional, especially niche, ETFs by letting individuals simulate the functionality of fund structures with greater flexibility and control.

While flagship low-fee ETFs tied to large indices like the S&P 500 are expected to remain core holdings, many smaller thematic ETFs may struggle to retain relevance as customizable and AI-powered tools become more user-friendly and accessible.

The Road Ahead for ETF Investors

With inflows surging, product innovation thriving, and customization becoming mainstream, 2025 is shaping up to be a transformative year for ETF investing. Whether it’s through actively managed strategies, yield-optimized products, or algorithmically generated portfolios, investors are diversifying their approaches like never before. The key challenge going forward will be balancing risk, cost, and performance in an increasingly competitive and technology-driven environment.