Europe is in the midst of a boom period for active ETF product launches. Last year, inflows into active ETFs tripled in Europe in a year when equity indexes, particularly those focused on the US, produced decent returns.
My colleagues Valerio Baselli and Francesco Paganelli looked at these trends in a recent video, What Are Active ETFs and Why Are They So Popular Now? They explain how active ETFs gained popularity in the US and are starting to win market share in Europe too.
Can these trends continue into 2025? New research from Carne Group surveyed 200 global fund managers on expectations for 2025: 81% of managers forecast a rise in inflows to their funds, both active and passive, in 2025, while 84% predict an increase in the number of fund launches in their sector.
“Exchange-traded products remain front of mind both for institutional investors and for asset managers looking to service client demand in 2025,” the Change 2025 survey said.
The majority of fund managers surveyed said that they expect ETFs to make up a greater proportion of assets under management by 2030, from around 10-15% currently.
Do Investors Benefit from Active ETFs?
Kenneth Lamont, principal at Morningstar, argued instead that the boom in active ETFs is being pushed by asset managers keen to follow the latest trend:
“The surge into active ETFs seems driven more by fear of missing out than by any distinct advantage of the ETF structure, while the benefits for investors remain modest.”
“For investors, the advantages of active ETFs are marginal. Many do not benefit significantly from intraday trading, for example. The most tangible upside is greater transparency, particularly in fee structures, as ETFs typically apply uniform pricing across all investors.”
He also notes that the doubling of European active ETF market share in the last two years “presents a potential lifeline for embattled asset managers”.
“Both Jupiter and Schroders have faced prolonged stock price declines as they struggle to maintain margins amid relentless fee pressures and stiff competition from larger US-based rivals.”
New Entrants Into The Active ETF Space
In terms of active ETFs, JP Morgan, Fidelity and Janus Henderson are becoming dominant players in the space. In Europe, recently we’ve had launches from UK-listed fund manager Jupiter JUP, in partnership with HANetf, and US investment bank and asset manager Goldman Sachs GS. Dutch asset manager Robeco launched four active ETFs last year and is planning to launch an EM-focused product in Q1 2025. UK fund manager Schroders SDR is also planning to enter this market.
In Jupiter’s case, it’s the firm’s first active ETF.
While this list is not exhaustive, it gives some idea of the scope of recent product launches:
Europe’s Active ETF Market Lags Growth in US
There are advantages for active managers in entering the space, but the market remains small:
“For many asset managers, active ETFs offer a way to leverage in-house expertise or repackage existing strategies to attract new investors through fresh distribution channels,” according to Lamont.
“Yet, for all its growth, the European active ETF market remains less than 0.5% of the broader European fund market, and the number of new investors favoring ETFs remains small while fee pressures apply equally (if not more so) in the ETF space.”
New entrants must also navigate a pricing dilemma, he argues:
- Set fees too high, and investors may turn to cheaper competitors.
- Set fees price too low, and they risk devaluing or cannibalizing existing strategies.
Lamont also stresses the divide between the US and Europe:
“In the US, active ETFs have flourished in part due to their tax advantages over traditional mutual funds—a benefit that does not extend to Europe.”
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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