Participants at a roundtable hosted by Funds Europe in London have identified key significant points of interest regarding the state and future growth of the ETF industry in Europe.
As outlined in the full report Future’s present: Mapping the continued growth and evolution of ETFs , input on these points came from industry experts including Manooj Mistry, chief operating officer, HANetf; Julien Boulliat, global head of Xtrackers investments; Mark Fitzgerald, head of product specialism, Vanguard; Rafaelle Lennox, head of UCITS ETF product strategy, Franklin Templeton; Adrià Beso, head of distribution, Europe, WisdomTree; Alex Pollak, head of UK, 21Shares; Tony O’Brien, chief commercial officer, U.S. Bank; and Eamonn O’Callaghan, group product manager, CACEIS Ireland Limited.
Highlighted points include:
- Rapid market maturation: The European ETF market has grown significantly, moving from a 2% market share (compared to mutual funds) to nearly 20% today, and has now surpassed the hedge fund industry in total assets.
- Retail is a key frontier: While the US ETF market ($16trn) is largely retail-driven, Europe is still at an early stage of unlocking this segment. With €14trn in European savings, the potential “runway” for retail growth is viewed as massive.
- The “Active” revolution: The ETF is evolving from a purely passive index tracker into a technology “wrapper” for any liquid strategy. However, the roundtable heard that bad active strategies will not succeed simply by changing wrappers; the underlying strategy must still generate alpha.
- Generational wealth transfer: An estimated $68trn to $100trn will transfer to younger generations over the next decade. These tech-native investors prefer the transparency, apps, and intraday liquidity of ETFs – including in Europe.
- Regulatory barriers persist: Fragmented tax regimes and the persistence of retrocessions remain headwinds. The argument was put forward that banning retrocessions would significantly affect the drive ETF adoption in Europe.
- Cultural shift from savers to investors: Europe lacks the inherent equity-buying culture of the US, but the rise of accessible brokerage platforms and automated savings plans (like German Sparpläne) is helping bridge this gap.
- The Crypto gap: The US crypto ETF market has surged to ~$180bn due to regulatory clarity, whereas Europe has stalled at ~$17bn because regulators (like ESMA) have hesitated to declare crypto assets eligible for UCITS structures.
- Technological challenge: Despite the hype around AI, the industry needs to ensure that as it scales, it also ensures the resilience of liquidity mechanisms – as well as the hardware used.
- Tokenisation as a disruptor: Tokenisation is predicted to be a major disruptor over the next 10-15 years, and therein could facilitate a level of transparency and instant settlement that challenges the viability of traditional mutual fund structures versus ETFs.
- Aggressive growth forecast: The roundtable heard predictions that within five years, ETFs could double their market share in Europe, mirroring the trajectory already seen in the United States.
Click here to read the full report: Future’s present: Mapping the continued growth and evolution of ETFs
