Sept 27 (Reuters) - Assets in actively managed

exchange-traded funds (ETFs) worldwide hit a record $1 trillion

at the end of August, according to data provider ETFGI, boosted

by easier regulations and a wave of product innovation.

Active ETFs seek to outperform the indexes they are

benchmarked to, including the S&P 500, the Nasdaq 100 and the

Russell 1000 Growth Index. Bear Stearns launched the first

active ETF in 2008.

While they make up just 7% of all global ETFs, active ETFs

have accounted for 30% of all inflows into the funds as a whole

for the last several years, Matthew Bartolini, head of SPDR

Americas Research at State Street Research, told Reuters in the

latest episode of Inside ETFs.

A key growth catalyst, analysts said, was the 2019

regulation popularly known as the "ETF rule," which streamlined

the complex process of winning approval for active ETFs from the

U.S. Securities and Exchange Commission. Assets in the active

ETF category have grown about 10-fold since 2019, according to

data from ETF.com.

Growth has continued this year. As of Aug. 31, active ETF

assets soared 42%, data from ETFGI showed.

The more relaxed regulations have also fueled innovation,

Bartolini said, encouraging issuers to take novel approaches to

products as they vie for investor dollars.

Active ETFs run the gamut from the plain vanilla, such as

the BlackRock Large Cap Value ETF to more niche

offerings, like the AdvisorShares Vice ETF, which

invests in shares of companies involved in the alcohol, tobacco

and cannabis industries.

"These regulatory rule changes have actually accelerated

some of the more novel approaches that ETF issuers can bring to

the marketplace," Bartolini said.

Active ETFs include products that have been wildly volatile,

such as Ark Innovation ETF, which soared 152% in 2020,

only to slump 23% the following year. So far in 2024, it has

lost 9.74%, compared with a 20% gain in the S&P 500. Some can

also magnify risk, such as leveraged ETFs tied to the

performance of individual stocks like Nvidia ( NVDA ).

Nor are all active ETF issuers faring well.

The 10 largest issuers accounted for 75% of active ETF

assets, according to a Morningstar report from earlier this

year. The bottom half of active equity ETFs have only 3% of all

the group's assets.

"ETFs that repackage old-fashioned stock-picking have

struggled to attract assets," said Jack Shannon, manager

research analyst at Morningstar, in a report published on

Tuesday.

Tim Huver, senior vice president of ETF Servicing at

Brown Brothers Harriman, said active ETFs may require investors

to do more due diligence. Nonetheless, he believes the category

has reached a turning point.

A Brown Brothers survey found that more than 90% of ETF

investors intended to increase their allocation to active ETFs,

Huver said.

"I think the second trillion is going to arrive much

more rapidly than it took us to get to the first trillion,"

Huver said.