European funds continued to attract inflows in Q3 of 2025, driven by lower inflation and uptick in bond issuances and IPOs, according to Morningstar’s data.
Total fund inflows reached €165 billion during the quarter, up from €121 billion in the previous quarter, bringing year-to-date flows to €452 billion.
Active funds outpaced passive products for the first time since 2021, collecting €107 billion versus €58 billion for passives. This was driven mainly by active fixed-income strategies.
Demand for passive ETFs was partly offset by the first quarterly outflows from traditional index funds in more than a decade. Pimco benefited from the surge in demand for active bond and money market funds, attracting €17 billion in new money.
European large-cap blend strategies gained €6.6 billion. Some investors returned to US equities but chose ETFs for exposure, showed the data.
Global flexible bond funds drew €16.1 billion as investors leaned on active management amid uncertainty, while emerging market bonds gained €6.4 billion helped by a weaker dollar.
Efama report highlights active vs passive funds’ nuances
European ETFs and ETCs hit a record quarter with €90.8 billion of inflows, lifting assets to €2.54 trillion. Equity ETFs led with €67.5 billion, while iShares became the first provider to top €1 trillion.
Schroders made its debut in the active ETF market. Active ETFs attracted €6.3 billion, up from up from €4.5 billion in the second quarter.
Jeana Marie Doubel, analyst, manager research at Morningstar, commented: “The European fund market showed a shift in investor sentiment in Q3, with 2025 potentially shaping up to be a year of recalibration. Active funds have regained favour this year, with net fund inflows outpacing passives in the third quarter. This resurgence was driven by the first outflows from index funds in over a decade alongside significant inflows into active fixed income, as investors seek a more hands-on approach to navigate market volatility. This reflects investor preference for flexibility and proven expertise in uncertain times, with firms like Pimco reaping the rewards of the renewed focus on active management.
Meanwhile, the ETF and ETC market continues to thrive, driven by buoyed demand for low-cost equity exposure, particularly in US markets. This highlights a cautious optimism among investors, balancing global opportunities with a need for efficient access to markets. The rise of active ETFs, alongside milestones like iShares surpassing €1 trillion in assets, signals a maturing market that is increasingly catering to nuanced investor preferences.”
