Literally every week there is at least one article or press release on the growth or launch of products in the segment of active ETFs in Europe, mostly starting with a catchy headline. It is true that active ETFs are a great success story in the U.S. and respective products have been launched in Europe more than a decade ago but were not getting much attention from investors so far. Therefore the question is if the hype around active ETFs can be proofed by numbers.
Here are the facts:
According to the Lipper database there were 72 active ETFs registered for sales in Europe at the end of December 2023. These ETFs held 23.7 billion euro in assets under management at the end of December 2023, which equaled 1.52% of the overall assets under management in the European ETF industry at that point in time.
Overall, active ETFs accounted for estimated net inflows of 4.9 billion euro over the course of 2023. These inflows equal 3.15% of the estimated overall inflows in the European ETF industry.
The success of active ETFs in the U.S. can mainly be attributed to a tax advantage of ETFs compared to mutual funds, which is not the case in Europe. Even worse, not all countries in Europe have a level playing field for ETFs and mutual funds. For example: ETFs face a tax disadvantage compared to mutual funds in Spain. In addition, there are market hindrances in some European countries as investors are simply lacking the availability of trading platforms, etc.
Don’t get me wrong, I do believe that active ETFs will become one of the major growth drivers for the European ETF industry in the future, but currently we are still at the beginning of this story. Therefore, I think that a lot of headlines we are reading at the moment are way too flashy given the current size and importance of active ETFs in the European ETF industry.
Nevertheless, it is important to follow the developments in this segment quite closely, as one doesn’t want to miss the point when the spark ignites significant growth in the segment of active ETFs.
I will cover this topic in more detail in my ETF yearbook which will be released on April 11.
The views expressed are the views of the author and not necessarily those of LSEG.
This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. LSEG Lipper cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.
