European individuals have never known capital markets to be as accessible as they are now. ETFs connect them with broad groups of listed companies, and new semi-liquid funds bridge smaller investors with non-listed firms.
Yet, with European markets on the rise, industry figures suggest Europe’s retail investors still hold much of their money in bank deposits, and even where they do invest in stock markets, the preference is for US stocks.
Are Europe’s retail investors going to miss out in Europe’s ‘Second Renaissance’?
Greater preference for US stocks
‘Fact Book 2025’ published by the asset management trade body EFAMA, shows a hopeful sign that retail investors are investing more of their money into funds. In 2024, EU households invested €258 billion in investment funds, which was the second-highest figure of the past decade.
Investors are increasingly looking for more granular or targeted European equity exposure
However, 40% of European households’ financial assets remained in low-yielding bank deposits, EFAMA noted.
Also, mainly via ETFs, they allocated more than 50% of their equity fund holdings to US stocks.
Sandro Pierri, EFAMA president, wrote that while there was renewed interest in European stocks in the first half of 2025, this was shaped partly by policy uncertainty in the US and the trend “will only be sustainable if structural measures are taken to strengthen the EU’s global competitiveness”.
Historic year for European equity
Tom Bailey, head of research at HanETF, described the renewed interest in European equity as “historic”.
“When we look at ETF flow data in Europe, we can see a marked increase in flows to funds focussed on Europe equity in 2025, with almost $80 billion in net new assets. That was a historic year for European equity ETFs and a dramatic turnaround from previous years,” he tells Funds Europe.
At the same time, Bailey says that while “core” equities still took the bulk of inflows, other segments also see historically strong upticks in new money, too.
“So, I think there are two trends here: Investors have upped their allocation towards Europe; and investors are increasingly looking for more granular or targeted European equity exposure,” he says.
“Europe’s €1 trillion autonomy agenda”
What some investors call “Europe’s Second Renaissance” – the political push for greater autonomy in the EU, and perhaps in neighbouring countries such as the UK – has now translated into accessible products for investors.
HANetf’s recent launch of the Making Europe Great Again UCITS ETF (ticker: “GR8”) exemplifies how some fund houses are packaging Europe’s autonomy story into investable strategies. The ETF provides equal-weighted exposure across four strategic segments: defence, energy, infrastructure and reshoring.
Europe’s stars have aligned to create a powerful growth environment
As well as HanETF, Candriam launched the active Candriam European Autonomy Equity Fund, saying the fund translates Europe’s “€1 trillion autonomy agenda” into a high conviction, thematic equity strategy, and Lazard Asset Management launched the Lazard Sovereignty Europe fund in the summer.
Swiss asset manager, Pictet Asset Management also announced in November 2025 the launch of the Pictet–Quest European Revival Fund, a quant fund aiming to “capitalise on Europe’s current and future economic resurgence”.
“Europe’s stars have aligned to create a powerful growth environment underpinned by major investments in technology, defence, strategic infrastructure, and supply chain revitalisation,” said David Wright, head of quantitative investments at Pictet AM, when the fund was announced.
Europe, or rather ‘Autonomous Europe’, has become a thematic investment.
European retail participation will grow
Sabrina Khanniche, senior economist at Pictet AM, says that European retail participation in the European Autonomy agenda will grow, albeit from a low base.
She argues that the Savings & Investment Union initiative could change the direction of travel for fund flows, from the US to Europe.
“A very large share of household financial wealth still sits in cash and bank deposits rather than in funds, equities or pensions, and roughly €300 billion of European savings is estimated to flow to non-EU markets each year, mainly the US, instead of financing Europe’s own strategic sectors,” Khanniche tells Funds Europe.
The Savings and Investment Union – an initiative of Enrico Letta, a former Italian prime minister – is the EU’s attempt to change that: to move part of those deposits into simple, long term, often equity-based products through standardised savings and investment accounts, more investment friendly pension systems, and a less fragmented capital markets framework, Khanniche adds.
“But these reforms are at an early stage, so for now the meaningful participation in any given theme still comes from a relatively narrow group of existing investors rather than from Europe’s full savings pool.”
Pan-European equity funds
Anthony Penel, a European equity manager at Edmund de Rothschild Asset Management, notes an increased momentum last year among certain EU countries to create a pan-European, tax-efficient equity savings plan that would invest mainly in European equities.
A number of EU countries including France and Spain are behind this project, building on Letta’s Savings & Investment agenda.
However, he adds that the ongoing difficulty with EU tax harmonisation, which is needed for this product to work efficiently, is still difficult to overcome.
Research suggests the ‘long US, short Europe’ position, and the era of US exceptionalism, is coming to an end
Penel, along with the firm’s co-head of equities Caroline Gauthier, manages the Edmond de Rothschild SICAV Mission Europa, a European equity fund launched in November 2025 and which links with Autonomous Europe. Mission Europa invests in companies across security, competitiveness, innovation and financing – four areas intended to strategically strengthen Europe.
Penel notes a Bank of America report from March 2025 that revealed the biggest rotation from US equities into European stocks since 1999. The BoA survey of fund managers found 69% of them believed the era of “US exceptionalism” was ending.
“Research suggests the ‘long US, short Europe’ position, and the era of US exceptionalism, is coming to an end,” Penel says.
A structural shift, not a cyclical trade
Fund managers would likely call this a once-in-a-generation opportunity – and it would be a shame for European individual investors to miss out. At least one of the largest US private markets money managers is jumping in. Jim Zelter, the president of America’s Apollo Global Management, was reported in the Financial Times to tell a conference last year that Apollo could invest as much as $100 billion in Germany over the next decade.
Germany’s creation of a €500 billion infrastructure fund attracts the most attention when talking about Autonomous Europe. Arguably, this fund – some of which will be aimed at climate solutions – shows that what began as a response to geopolitical instability, supply-chain fragility and energy insecurity in the EU is now reshaping fiscal policy, capital markets and the investment opportunity set available to asset managers.
Strategic Autonomy has become a central pillar of Europe’s growth strategy. According to a European Commission paper (‘The potential economic impact of the reform of Germany’s fiscal framework’, May 2025), the implications extend beyond Germany’s borders.
Economic modelling suggests the programme could lift German GDP by around 1.25% by the end of the current legislative term and by as much as 2.5% by 2035, with positive spillovers adding roughly 0.75% to EU GDP over the same horizon.
Yet the capital requirements for autonomous Europe involved are vast and extend well beyond electoral cycles. Magnus Burkl, head of capital markets Europe at Oliver Wyman, speaking at a Clearstream conference, highlighted that to finance its climate transition, digitalisation and infrastructure renewal, Europe requires between €800 billion and €1 trillion annually. Yet too much retail wealth remains in deposits, pension systems lack sufficient funded capital, and European financial institutions have lost market share to global peers.
Sharp rise in debt
Mario Draghi, the politician and economist, originally stated in 2024 that an €800 billion annual target is needed to increase the competitiveness of Europe.
The autonomy push is not without risks. Public debt levels are set to rise sharply as governments issue large volumes of sovereign bonds to finance defence, infrastructure and energy investments.
In its Autumn 2025 Economic Forecast, the EC said that 12 Member States are set to have deficits exceeding 3% of GDP in 2027, one more than in 2025. By 2027, four Member States are set to have debt ratios above 100% of GDP.
This will increase public borrowing, but Europe starts from high private savings and still‑manageable debt levels in many countries
However, Khanniche, the economist at Pictet AM, said the macro backdrop is broadly supportive. She notes Europe faces security and industrial pressures, and adds: “This will increase public borrowing, but Europe starts from high private savings and still manageable debt levels in many countries.”
Anthony Penel at Edmond de Rothschild AM, notes the projection for €800 billion a year in EU financing needs, with 80% coming from the private sector.
“Debt will not be the main source of finance in this project. However, we do need more finance, especially for defence,” he says.
The roughly €650 billion a year that will come from the private sector is why the Mission Europa fund contains a financing theme.
Penel says some of France’s largest insurers and pension funds were summoned by senior ministers last year to be incentivised to finance defence and support European sovereignty.
“That’s why so many funds were created between May and the end of the year,” says Penel.
Another factor is the introduction of fast-tracking for defence-related financing projects, both in France and at the EU level.
One stock that Mission Europa holds in its financing sleeve is Societe Generale, the French bank, which is favoured partly for its financing of small and medium-sized enterprises.
Rocket boosters for European growth
Drilling into the fund more, the fund holds Avio, an Italian company that makes rocket boosters and which has a development project for US missiles.
Also, within this security theme, the fund holds Sweden’s Boliden, a coper miner, as part of a critical materials sub-theme and which links with the EU’s Critical Materials Act. The act aims to secure a sustainable supply of critical materials for the EU’s digital and climate initiatives, including rare earth minerals.
Denmark’s fracas with the US over Greenland to some extent highlights the need for sovereign supply lines of minerals. Greenland is rich in rare earths.
David Wright of Pictet AM says Europe’s revival will drive significant profit growth for companies in areas related to sovereignty and autonomy.
“For instance, European aerospace and defence stocks are projected to achieve a compound annual growth rate (CAGR) of approximately 22% over the next two years, supported by increased defence-spending commitments across the region.
“Likewise, industrial and infrastructure companies stand to benefit from Germany’s €500 billion infrastructure investment fund and broader reindustrialisation efforts, while utilities are well positioned.”
Tom Bailey at HanETF notes Panmure Liberum’s Joachim Klement saying that almost 10% of the expected earnings-per-share growth for Europe over the next five years will come from increased defence spend and German infrastructure spend.
“With this in mind, we think many investors will be looking for exposures more sensitive to these policy drivers,” Bailey says.
Room for all
European Autonomy is a thematic investment with room for all manner of participants and funds, from ETFs to private markets. Capital could find willing recipients who are supported by sovereign policy. Fund managers should tap into Europe’s savings pool to aid European citizens join in the riches.
Pictet’s Khanniche says: “What is key is to invest well enough to crowd in private capital and raise growth rather than just adding debt.
“With massive needs in defence, energy and technology, targeted public programmes can act as anchors for private investment, especially if they are paired with reforms that deepen capital markets and channel Europe’s large savings into productive risk taking at home.”
