The active ETF market in Europe is poised for accelerated growth, supported by regulatory advancements, increasing investor demand, and a surge in new product launches by major fund management firms, according to Carne Group, a provider of governance and regulatory solutions in the asset management industry.
The research has highlighted that more than four out of five institutional investors and wealth managers anticipate allocating at least 5% of their investment portfolios to ETFs within the next three years.
Patrick O’Brien, managing director of business development at Carne Group, emphasised that active ETFs will offer greater choice for investors and fund managers alike, largely due to evolving regulations that allow broader participation in the sector, traditionally dominated by passive funds. “The regulatory landscape is changing, enabling more managers to enter the ETF space, offering investors a wider range of options.”
One key driver of this growth is the increasing number of prominent asset managers such as iShares, Robeco, Eurizon Capital, and Ark Invest, launching or planning to launch active ETFs in Europe, according to the researchers. The anticipated introduction of a more favourable regulatory framework, particularly through the Ucits eligible assets directive by the European Securities and Markets Authority in May 2024, is expected to further boost this trend.
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Globally, active ETFs have already seen significant momentum. In the first half of 2024, actively managed strategies captured 25% of ETF flows, with assets growing to a record $889 billion. In Europe, active ETFs have doubled their market share in recent years, from 3% of ETF flows in 2022 to 5% in 2023.
Carne’s research also noted a shift in how institutional investors perceive ETFs. Almost all investors now view ETFs as core holdings rather than vehicles for short-term allocation, signalling a long-term commitment to the asset class.
O’Brien added: “Institutional investors are looking to increase allocations to ETFs over the next three years as our research shows, with ETFs firmly established as a core holding rather than a short-term allocation tool. More active ETFs will lead to more choices. This will further increase investors’ holdings in ETFs as part of their core investments and that trend will be supported by more managers entering the space and opening up new distribution channels.”
