Friday Facts: Will the Concentration of the Assets Under Management in the European ETF Industry Lead to a Consolidation?

Despite the growth of the European ETF industry, there is one question which drives the discussions of market observers. Is there a consolidation ahead in the European ETF industry? This question seems to be a bit odd given the growth in assets under management and the overall level of estimated net inflows over the year 2024, as well as the previous years. On the other hand, the estimated net inflows were quite concentrated. This means that only a limited number of ETFs, and as a result a small number of promoters, were able to gather a significant share of these flows. The concentration of the estimated net flows further increased the concentration of assets under management at all levels. As a result, there is still a high number of ETFs, as well as a high number of ETF promoters, which lack a sufficient number of assets under management to be profitable.

This lack of assets under management may lead to a consolidation at the ETF and promoter levels since no corporation can sustain a business model which generates permanent losses. On the other hand, we see a number of new market entrants at the promoter level, which means that the number of ETF promoters in the European ETF industry will increase rather than decline over the course of the next few years. Hence, there will be no “real consolidation,” since a consolidation would mean that the number of promoters and/or ETFs will decline.

Speaking about the ETF level, it is to be expected that the number of ETFs available to investors in Europe will increase significantly over the years to come, as an increasing number of managers of actively managed mutual funds will launch new ETFs or ETF share classes of their existing products. This means that the European ETF industry will enjoy overall growth over the coming years despite the fact that some promoters will leave the industry. The same is true at the ETF level, even as it is to be expected that there will be a high number of ETF closures over the next couple of years. Nevertheless, it is to be expected that the number of ETF launches will outpace the number of ETF closures by a wide margin.

This article is for information purposes only and does not constitute any investment advice.

The views expressed are the views of the author, not necessarily those of LSEG Lipper or LSEG.