Musings on the state of the European ETF market

These are exciting times for European ETF markets. Growing adoption of the funds, evolving technology, and increased investor education and awareness of ETFs are all attracting an increasing number of asset managers to European fund centers.

Our 2025 Global ETF Investor Survey found 95% of European investors planned to increase their overall exposure to ETFs over the next 12 months. And while the retail market for ETFs in Europe is still a fraction of that in the US, it is growing fast.

The rising attractiveness of ETFs, 25 years on from their launch in Europe, has matched the increased diversity of exchange traded products. No longer strictly the domain of low-cost index trackers, the ETF Market has seen transformative change over the last decade, to incorporate diverse strategies and asset classes.

Active approach

The market has started to embrace active management, across equity, fixed income, synthetic, smart beta, and thematic strategies. The regulatory environment has also evolved, which has streamlined the path to market, including allowing established managers to launch an ETF as a share class under the umbrella of an existing mutual fund, which can bring scale and track record to the ETF class from the outset.

Against this backdrop, assets invested in global ETFs rose 27.7% last year to $14.7 trillion due to strong market performance and record investor inflows¹.

The growing retail appeal of ETFs in Europe has coincided with advancements in technology which are, of themselves, reshaping large swathes of the asset management industry.

Technology that lowers the barrier to trading ETFs, such as online platforms and neo brokers², provides a new point of access for younger, highly tech-savvy investors. Additionally, so-called ‘Finfluencers³’ who provide investment advice and other education are reaching these investors through new mediums, meeting the next generation where they choose to consume information.

European prize

This comes at a potentially pivotal time for the European asset management industry. The European Union Savings and Investment Union (SIU) project seeks to offer EU citizens broader access to capital markets and better financing options for companies.

The SIU could provide a major opportunity for ETF promoters and investors, though many acknowledge greater investor education, financial literacy and understanding of these products is needed.

According to numerous industry forecasts, the predicted Great Wealth Transfer could see a huge movement of investment assets from the Baby Boomer generation to the Generation X and Millennial cohorts.

Consulting firm PwC is forecasting a global transfer of wealth of $68trn dollars over next 10 years between generations⁴. As recipients of this wealth transfer seek to make their own investments, the European ETF market could present an attractive investment proposition with some in the industry predicting it could help spur the market to double in size by 2030 to reach $4.5trn assets under management⁵.

The opportunity

Although these factors could all contribute to increasing opportunity, we find some asset managers still remain uncertain about launching ETF products. Often, they fear misperceptions of ETF complexity. While there are certainly nuances to the European ETF market, we find ongoing education and engagement can help to dispel some of these myths.

A common misconception about ETFs is that their distribution needs are particularly complex or difficult, given the fragmented nature of the European market and growing complexity of ETFs themselves. Like any new product, introducing ETFs (especially into a broader offering by an asset manager) does require consideration to ensure the appropriate level of support and momentum, but proven strategies exist to help. For example, by integrating ETF specialists within broader mutual fund sales and support teams, fund promoters can identify and solve potential problems at an early stage. In most cases the firms currently investing in mutual funds are the same as those investing in ETFs, so the potential for cross-selling to find the right product fit is vast.

While it is true some of the tax advantages ETFs enjoy in the US do not exist in Europe, their sheer versatility in uncertain global markets holds significant appeal. What was once a trickle of large US players entering the market via European domiciles, such as Ireland and Luxembourg, have now become a steady flow of interest and fund launches from across the pond . Increasingly, global asset managers are also using Europe, and more specifically the UCITS wrapper, to distribute their products more widely in emerging markets across Asia and Latin America.

In an important new move, April saw the Central Bank of Ireland (CBI) amend its portfolio transparency requirements for ETFs⁶. This change provides for the ability to establish semi-transparent ETFs, providing the ability for managers to limit the frequency of disclosure of their portfolios, which is an oft-cited reason provided by active managers in their reluctance to launch ETFs.

The latest move broadly follows the Luxembourg regulator’s lead on permitting the use of semi-transparent ETFs within the Grand Duchy, and opens up new opportunities across the continent.

With momentum building across the region amidst new developments on the regulatory, technological and product strategy fronts, we are excited to see what the second half of the year brings.