We investigate whether packaging active management into an exchange-traded, shortable vehicle improves managerial discipline and capital allocation. We show that actively managed ETFs (AETFs) exhibit flow-performance sensitivity (FPS) almost three times higher than nearly identical mutual funds. This heightened sensitivity is driven by short-selling: AETFs with higher short positions experience significantly steeper FPS, as short-sellers trigger outflows via the ETF redemption channel. This external monitoring imposes real career consequences: short positions spike upon the appointment of poor-performing managers and predict managerial exit. Finally, we show that short-selling discipline shapes the composition of managers across fund structures, as the best performers manage AETFs while the worst manage only mutual funds. Our results suggest that removing short-sale constraints on delegated capital strengthens the disciplinary forces that align capital with managerial ability.