European fund flows in 2025 showed a split between investor demand for low-cost equity exposure and active management in fixed income, according to data from Morningstar.
Passive equity funds continued to dominate equity flows, while active bond strategies attracted record inflows as investors sought flexibility and expertise to navigate uncertain macroeconomic conditions.
Active equity funds recorded net outflows of €40.8bn in 2025, marking the fourth consecutive year of investor withdrawals from active equity strategies. In contrast, passive equity funds attracted €227.4bn of inflows during the year.
In fixed income, active bond strategies gained €310bn in 2025, up from €259bn in 2024 and representing the highest annual total of the past decade. Passive bond funds attracted €49.9bn, down from €80.9bn the previous year.
Managers with strong passive offerings continued to dominate league tables for assets and flows, according to Morningstar, while active bond specialists also benefited from renewed demand. Pimco was among the top beneficiaries, attracting €36.8bn of inflows over the year.
Q4 2025 saw European investors returning to US equities, with €6.9bn of inflows into large-cap blend strategies, reversing €6.7bn of outflows recorded in the third quarter. However, overall sentiment remained cautious towards US dollar exposure, with the dominant equity theme of the year being a broad rotation towards European markets.
Bond investors similarly reduced reliance on US dollar exposure, favouring emerging market bonds, USD-hedged strategies and shorter-duration funds.
Thematic funds lost €37bn in 2025, bringing total outflows over the past three years to €112bn. Defence-themed funds were among the few areas to record net inflows during the year.
The European ETF and ETC market reached new records in 2025, with inflows rising to €337.5bn from €234bn in 2024. Total assets increased to €2.72trn, up from €2.18trn a year earlier.
iShares topped the European ETF flows league table with €122bn. Amundi was the second-largest provider, attracting €46.8bn of inflows during the year.
Active ETFs gathered €22.3bn of inflows in 2025, up from €18.4bn in 2024. Active ETFs accounted for 6.6% of total ETF flows in Europe and held €73.6bn in assets at year-end, representing 2.7% of total European ETF assets, up from 2.4% the previous year.
JPMorgan remained the largest provider of active ETFs in Europe, with a market share of 48.7%, while iShares increased its share of the active ETF market to 6.8%, from 1.1% in 2024.
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Jose Garcia Zarate, senior principal, manager research at Morningstar, commented: “The European fund market in 2025 showed an interesting duality in response to heightened market volatility and shifting investor priorities. While passive equity funds continued their decade-long growth and proved the go-to vehicle to quickly execute the reallocation out of US exposure, the record €310bn inflows into active bond strategies signal a clear preference for hands-on management to navigate uncertain economic conditions. Investors have valued expertise and flexibility, with firms like Pimco benefitting from the demand.
Meanwhile, the ETF and ETC market reached new heights with €337.5 billion in flows, driven by demand for cost-efficient equity exposure and the growing appeal of active ETFs. Milestones like iShares’ dominance and the rise of active ETFs reflect a maturing market that is increasingly attuned to diverse investor needs and strategic opportunities.”
