Three ETF trends poised to shape 2026

The exchange-traded fund (ETF) industry continues to evolve at a rapid pace, driven by investor demand for innovation, efficiency and flexibility. As we look toward 2026, three major trends stand out: The growing use of options in ETFs, the rise of active fixed income ETFs, and the anticipated rollout of ETF share classes for mutual funds. Each trend reflects a broader shift in how investors are approaching portfolio construction and risk management.

More options use in ETFs

Options-based ETFs have surged in popularity in recent years, as the ETF wrapper has democratized what were historically sophisticated institutional strategies for a broader investor base. Single-stock options strategies are particularly hot, allowing investors to make concentrated bets on individual names. These products can offer leveraged exposure on both the upside and downside, but they also carry heightened risk – so caution is warranted. Investors should understand that while these ETFs can amplify returns, they can also magnify losses, making them suitable primarily for sophisticated market participants and traders.

Derivative income and defined outcome ETFs, which integrate options strategies for risk mitigation and income generation, also continue to gain significant traction in the marketplace. These purpose-built vehicles have largely met investor expectations, offering a way to enhance yield or hedge downside risk without abandoning core equity exposure. For example, covered call strategies, such as the Natixis Gateway Quality Income ETF (GQI), have become a popular tool for generating incremental income in volatile markets. As uncertainty persists around interest rates and macroeconomic conditions, demand for these strategies is likely to remain strong, positioning options-based ETFs as a key growth segment.

Active fixed income ETFs

Fixed income ETFs are experiencing a renaissance, with active strategies leading the charge. Historically, equity ETFs dominated early adoption due to their significant tax advantages compared to other vehicles. Fixed income ETFs, by contrast, generate limited annual capital gains, making tax benefits offered by ETFs less pronounced. This dynamic partly explains why fixed income was a “second mover” in the ETF space.

However, accessibility and competitive fees have changed the game. Investors now appreciate the liquidity, transparency, and operational simplicity ETFs provide. Active fixed income ETFs are gathering meaningful assets as investors seek professional management to navigate rate cycles, credit spreads, and duration risk. Year-to-date flows tell the story: Roughly half of fixed income ETF inflows are going into active strategies – a higher ratio than in equities. Yet the total market share remains heavily tilted to legacy passive strategies, so the runway for active fixed income ETF growth remains favorable. This trend underscores growing confidence in active managers’ ability to add value in a complex fixed income environment.

Another driver is the narrowing fee differential between active and passive fixed income ETFs. Historically, active strategies carried a significant premium, but as fees compress, investors see strong value in active management. With bond markets facing structural shifts and heightened volatility, active ETFs offer flexibility and expertise that passive strategies may lack.

ETF share classes of mutual funds

One of the most anticipated developments for 2026 is the introduction of ETF share classes for existing mutual funds. While launches are expected, asset managers are proceeding methodically. The benefits for shareholders are clear: Cost advantages through shared scale, improved tax efficiency, and expanded vehicle choice. This hybrid structure could allow investors to access the same underlying strategy through either a mutual fund or an ETF, depending on their preference for liquidity and trading flexibility. Furthermore, existing investors in mutual fund classes would be permitted to convert over to the new ETF share class via a tax-deferred exchange.

Timing considerations, however, are complex. Broker-dealer readiness and the operational buildout from multiple ETF ecosystem partners, particularly around the exchange privilege, are carefully being developed. Managers must ensure seamless integration to deliver on the promise of efficiency and flexibility without disrupting existing investor bases. Early adopters will likely concentrate on strategies that align well with the ETF structure, factoring in daily portfolio transparency, liquidity of underlying holdings, and capacity limitations. Issuers like Natixis must work closely with portfolio teams and the broker-dealer community to carefully select mutual funds suitable for ETF share classes to ensure the structure benefits both current and prospective shareholders.

Bottom line

These trends underscore the ETF market’s adaptability and its ability to meet evolving investor needs. From innovative options overlays to active fixed income strategies and hybrid mutual fund structures, ETFs are no longer just passive index trackers – they’re becoming a versatile tool kit for modern portfolio construction. As 2026 approaches, investors and asset managers alike should prepare for continued innovation and a broader array of choices.