While exchange traded funds (ETFs) under management have reached record levels of $22 trillion this year1, market evolution varies widely across geographic regions, posing some unique challenges and opportunities for both promoters and distributors. BBH’s recent London event, The World of ETFs: Regional insights, global perspectives, was moderated by BBH vice-president Claire Conroy and offered insights into the key regional differences and challenges facing asset managers and distributors.
US market challenges
BBH head of US ETF servicing, Tim Huver, underlined the US’s position as the most mature and innovative ETF market globally.
According to Huver, active ETF structures now represent the vast majority of new US fund launches, attracting a disproportionate share of net inflows. He also pointed to growing production innovation in areas such as mutual fund to ETF and share class conversions, fund cloning, and the wider benefits of US tax rule support for ETFs.
Yet despite a thriving US ETF business US market challenges still exist.
“In many ways barriers to market entry have never been lower, yet some distribution hurdles remain, particularly with wealth and wirehouse platforms whose requirements around performance track record, asset levels, and liquidity can be restrictive,” said Huver.
European evolution
BBH head of EMEA ETF servicing, Andrea Murray, described regional ETF adoption as increasingly being driven by savings plans, investment platforms, pension reforms, and government initiatives designed to encourage saving-to-investing transitions.
Murray highlighted the rise of platform partnerships, co-branded ETFs, and banks launching their own ETF products as major structural developments.
Active ETF markets by stage of adoption:
| Region | Active ETF Market Stage |
| US | Mainstream |
| Europe | Rapid expansion |
| Asia | Early development |
| Latin America | Nascent |
Active ETF adoption varies across geographic regions (see box). While active ETFs remain a small portion of the overall European market, Murray said they are growing rapidly due to regulatory changes that are making the wrapper more appealing to traditional active managers.
“European transparency and shifting regulation – such as moves towards a Savings and Investment Union (SIU) - are accelerating active ETF launches. Europe is also unlocking retail distribution in markets such as Germany and we are seeing growing adoption of actively managed ETF products,” she said.
However, Murray also identified some key market challenges, including the need for dedicated ETF capital markets expertise in a region where having good, highly knowledgeable distribution partners can also be critical to success.
“Capital markets expertise remains the biggest operational challenge for new issuers in Europe,” she added.
Asian fragmentation
BBH head of Asia ETF servicing, Chris Pigott, described the region as a thriving if multifaceted, fragmented ETF market undergoing rapid change.
Describing some unique market trends seen in Asia, Pigott added that ETF ‘Connect’ schemes with Mainland China create some significant cross-border growth opportunities, while digital distribution channels are also becoming increasingly important in markets such as Hong Kong.
“Retail investors remain highly influential in Asian markets, though investor behavior can vary dramatically across local individual markets. The market is evolving fast, with mainland China's active ETF approvals potentially opening a major new market in the region,” he said.
LatAm potential
Discussion on Latin America focused less on product innovation and more on market access and distribution.
The Latin American investment market lacks regional harmonization. BBH head of relationship management Americas, Daniel Montoya, described how each local market has separate regulatory, tax, and operational requirements, creating significant complexity for asset managers and their distributors.
“Achieving ETF market success in the market depends far less on launching new products and far more on securing strong local distribution partners and building local market-maker relationships, understanding institutional buyer behavior and adapting strategies on country-by-country basis,” he said.
Despite these challenges, Montoya believes there is major scope for growth in regional and local ETF markets.
“While local ETF markets remain relatively small, demand for global ETF exposure is already substantial in countries such as Mexico and Chile while Brazil has built a strong retail ETF investor base,” he said.
Executive takeaway
Panelists’ central conclusion was that ETFs have moved beyond a mere product category to become a truly global investment vehicle with the development of active ETFs an increasingly dominant global growth theme.
With the US driving innovation, Europe is unlocking retail distribution and active adoption through changing regulations. In turn, Asia is creating new growth models while Latin America continues to present significant untapped market potential. Against this backdrop, retail investors are becoming more important everywhere.
Whether discussing Germany, Hong Kong, Brazil, or the US, our experts consistently described distribution as the main factor that determines success, in many cases becoming even more important than product manufacturing. On the downside, there is evidence, particularly in Europe, that much-needed ETF focused capital markets expertise is in short supply.
Nevertheless, across every region, the panel concluded that the combination of active ETFs, retail investor growth, and improved distribution infrastructure is helping to shape the next phase of industry expansion.
