The European passive management landscape is changing. In the wake of the great success of trackers among investors, ETF providers are expanding their range of offerings in Europe in terms of asset classes and strategies.

To provide some context, long-term passive Europe-domiciled open-ended funds show a 7.7% organic growth rate (OGR) year to date, meanwhile their active counterparts saw a 1.3% organic growth in the same period.

Such a trend is even more pronounced among equity strategies: passive equity funds experienced an 8.1% OGR between January and October, meanwhile active equity products had a negative 1.7% organic growth.

The Dominance of iShares

In Europe, when it comes to ETF providers, there are no surprises. The market leader is clear: iShares manages 43% of the total ETFs assets in Europe, a market share that has been stable for a few years now. BlackRock’s ETF issuer topped also the flow league in the first 10 months of 2024, with EUR 65.8 billion taken in (35% of total inflows).

“iShares had something of a first mover advantage, particularly so when it came to the development of bond ETFs in Europe”, says Jose Garcia Zarate, associate director for passive strategies at Morningstar. “Also, they always had a strategic focus for physical replication, which helped them consolidate their dominant position when investors got concerned about the synthetic structure many years ago”.

Competition Escalates Among ETF Providers

Among major ETF providers, however, those that have organically grown the most are State Street (a 26% organic growth rate in the year to date) and Vanguard (+18%).

The former has benefited from strong flows into its S&P 500 ETF. Around 40% of the flows for the provider year to date have been directed to this product. “State Street cut the fee of this ETF from 0.09% to 0.03% in November 2023, and this has paid off handsomely for them in terms of flows at a time when investors have had a strong focus on the US equity market”, says Garcia Zarate. In 2024, they have also seen strong organic growth in the S&P US Utilities Sector ETF, which has helped.

For Vanguard, as well as ongoing strong flows into their S&P 500 and FTSE All-World, they have benefited from strong organic growth rates in several of their bond ETFs.

Xtrackers also has done very well so far in 2024 and has seen its market share increase from 10.2% in October 2023 to over 10.8% in October 2024. At the same time, Amundi, while still managing to hold on to second position in the European ETF provider league table, has seen its market share decline slightly the same period from 12.7% to 12.4%.

“While no one questions iShares’ dominant role, there is intense competition immediately below”, adds Garcia Zarate. “The main providers strive to follow a supermarket model, meaning that they have increased their offering to investors in all asset classes and want to be a one-stop shop for them. Then, there are other providers which are more of specialist houses, for example Natixis (Ossiam) and so they cannot be easily compared to the ones mentioned before”, he concludes.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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