The active ETFs of tennis: Carlos Alcaraz and Jannik Sinner

If you know me, you know I love tennis. I greatly enjoy hitting with my kids and watching them compete in local tournaments, and I even play a few USTA league matches myself on occasion. And if you follow tennis like I do, you’ll probably agree that the most thrilling pros to watch are the “Big Three”—Roger Federer, Rafael Nadal and Novak Djokovic. These three are typically considered the greatest of all time (if there can be three GOATs) and currently sit 1-2-3 on the list of most grand slams won in the history of men’s tennis. To put their dominance in perspective, there were 82 grand slams played between Federer winning his first grand slam at Wimbledon in 2003 and Djokovic winning his 24th at the 2023 US Open. Those three won 66 (80%) of those grand slams. Simply astonishing!

Two decades is an almost unprecedented amount of time for that level of dominance. Not surprisingly, over the past five to 10 years, tennis fans were interested to see which of the “next gen” rising stars would make the leap to grand slam champion, especially as the Big Three approached their mid-30s. Players like Alexander Zverev, Taylor Fritz, Daniil Medvedev, Stefanos Tsitsipas and Casper Ruud were all hyped as the next big thing. They all were among the world’s top five at some point, and pundits thought at least one of them would win multiple grand slams once the Big Three rode off into the sunset. Well, collectively that group has won only a single grand slam (Medvedev, 2021 US Open).

Their lack of grand slam success is entirely due to the meteoric rise of two players—Carlos Alcaraz and Jannik Sinner—who have each won half of the last six grand slam titles since the start of 2024. They played one of the great finals of all time at the 2025 French Open and seem to be on track to do the same at this year’s Wimbledon. I was lucky enough to see them play in person at Indian Wells and can personally attest their excellence is as inspiring as advertised.

Wimbledon happens to coincide with the midway point of the year, which is typically when I check in on my exchange-traded fund (ETF) predictions from earlier this year. I was incredibly bullish on active ETFs, and through six months that call has been prescient. From a sheer number’s perspective, in the United States, there are now more active ETFs than indexed funds.

That success must come from somewhere, and smart beta is bearing the brunt of active ETFs’ success. In the United States, smart beta accounts for almost 20% of assets but has not even reached 8% of net inflows thus far in 2025.¹ I can speculate as to why that might be the case. As I’ve mentioned many times before here, the “ETF Rule” was a seminal moment for active ETFs that highlighted to investors that there were no operational differences between active and index funds. From there, it makes sense that investors seeking something beyond market capitalization equity exposure would prefer the full flexibility offered to an active manager as compared to index rules that are locked into a regular rebalance schedule.

If I squint just right, I think the trends of professional tennis can be accurately mapped against the ETF industry. As mentioned above, the Big Three won 80% of grand slams over a 20-year span, a figure that almost matches the assets under management (AUM) share held by passive ETFs as the vehicle overall gained popularity with investors. ETF issuers (including Franklin Templeton) looked ahead to what might define the next chapter of ETF innovation, and smart beta was a logical choice, much like those top five tennis players who rightfully thought they might come to dominate grand slams. As it turns out, it’s active ETFs that are gaining momentum—net inflows show they’ve added more than $200 billion year-to-date, and represent almost 40% of all net inflows in the United States despite representing only 10% of the assets under management.² Much like Alcaraz and Sinner’s current surge on the tennis circuit, active ETFs are proving their value by offering investors tax efficiency, flexibility and transparency within the ETF wrapper.

So at least for now, it is game, set, match for active ETFs!