Asset managers that launched actively managed exchange-traded funds may want to crack open the bubbly a little early this holiday season.

A record $257 billion has flowed into active ETFs thus far in 2024, according to data from research company Morningstar. That's double last year's haul and comes amid a surge of new fund launches.

In just the past month, titans such as Vanguard and BlackRock as well as other players such as Harris Oakmark and MFS Investment Management have launched new active ETFs. There have been more than 500 active ETF launches in the U.S. this year through Dec. 5, according to Morningstar.

"It's a great time for ETFs and asset managers are increasingly shifting their focus to bring products to meet demand," says Todd Rosenbluth, head of research at fund analytics firm VettaFi.

Active ETFs have surged because of rising customer demand and shifts within the asset-management industry. Although there remains far more money in mutual funds than ETFs, the latter has soared in popularity among investors and financial advisors because they are transparent, tax-efficient, and easy to trade.

An increasing number of financial advisors also use model portfolios that are composed of ETFs. Models can help advisors more efficiently manage portfolios on behalf of clients, freeing up their time to focus on other aspects of financial planning.

In addition, SEC rule changes enacted in 2020 have made it easier for companies to launch ETFs. "That lowered the barrier to entry for traditional active managers to come to market," says David Sharp, a director on Vanguard's ETF capital markets team.

Asset-management firms have also gotten more comfortable with launching active strategies in a transparent ETF format. Unlike a mutual fund, an ETF provides daily lists of holdings while mutual funds are only required to disclose holdings quarterly. Asset managers who were once hesitant to provide such frequent disclosures for fear of revealing their "secret sauce" have clearly gotten past their reticence.

"There are many differences between an ETF and a mutual fund, but that is a major difference for an asset manager," VettaFi's Rosenbluth says. "You're disclosing your holdings on a daily basis."

ETFs galore. Some asset-managers, including venerable mutual fund providers, have launched their first active ETFs just this year. They include MFS Investment Management, which gave birth to the first mutual fund a century ago. The company debuted five actively managed ETFs this week.

Michael Roberge, CEO and chair of MFS, said the firm is meeting investors where they are today.

"Since the creation of the mutual fund a hundred years ago, MFS has continually evolved how we deliver long-term value to our clients," he said. "These new active ETFs are an exciting next step in that journey."

MFS' new funds cover five popular investment categories: U.S. Value, U.S. Growth, International Equity, U.S. Core Plus and Intermediate Muni Bond. The Boston-based company manages $636 billion in assets as of Oct. 31.

Vivian Tung, senior managing director and investment product specialist for ETFs at MFS, says that the new funds are a response to clear long-term demand for transparent active ETFs. "No one delivery vehicle works best for every type of client type and investment strategy -- therefore, offering choice ensures we meet diverse needs and remain relevant to our clients," she said.

Harris Associates also launched its first active ETF this week: Oakmark U.S. Large Cap ETF $(OAKM)$.

Other companies have been adding to their ETF lineups. For instance, Charles Schwab plans to launch its third active ETF in 2025: Schwab Core Bond ETF. The company isn't new to the ETF space. Its asset management unit launched its first such fund in 2009 and has more than $1 trillion assets under management.

Last month, Fidelity Investments said it was adding five actively-managed equity ETFs. The company said it had seen a steady increase in investors and advisors allocating to active ETFs.

Although Vanguard is best known for passive index funds, the company has made actively managed strategies available to investors for decades. But it didn't have active ETFs until 2018 when it launched a suite of factor funds that year. It is following that up with more fund launches, including last month, two new muni ETFs. Vanguard CEO Salim Ramji has said he sees active fixed income as a key area of expansion for the company.

Vanguard's Sharp says the company has long embraced active management so long as it's low-cost. "If you can charge low expense ratios, you don't have to take the same amount of risk as another manager would to achieve that total return outcome."

In addition to rising demand for ETFs, some firms see fresh opportunities for active management strategies in the current market environment. That's a reason that Harris launched its new fund.

"We believe that one of the most interesting dynamics is the wide spread between the S&P 500 PE multiple and the multiple of the average stock," says Bill Nygren, partner and CIO for the U.S. "The S&P is at 23, and the average stock is 16 or 17. So we think there is an opportunity today to buy a diversified portfolio of companies that are trading below the market multiple."

Harris Oakmark, an affiliate of Natixis Investment Managers that was founded in 1976, has $104 billion in assets under advisement. Nygren says the convenience and transparency of an ETF "really appeal to a subset of investors."

While it's hard to predict whether fund flows next year will match 2024's haul, investors can safely expect more asset managers to expand their active ETF lineups.