The European ETF industry is one of the most innovative parts of the European fund industry since existing ETF promoters and those who want to enter the market are constantly trying to deliver new products which enable investors to invest in new asset classes. This approach worked fine over the last 25 years, but some of the upcoming trends in the European and global fund industry would be concerning if they found their way into the ETF wrapper.
On Friday, May 2, 2025, Michael O’Riordan, the founder and CEO of Blackwater ETF Consulting, asked on LinkedIn the question of which kind of ETF will be the “next big thing” for the ETF industry. With regard to this, he mentioned three possible product strategies which may become the real “next big thing”:
- actively managed ETFs
- ETF share classes
- private markets ETFs
As Michael mentioned in his post, the definition of success in the fund industry are inflows and the resulting size of a product after a given time period.
When it comes to this measure, it can easily be said that actively managed ETFs have made a good start in the ETF industry. That said, while they have become very successful in the U.S., actively managed ETFs are still a small part of the overall European ETF industry and have, therefore, the potential to become the “next big thing” in Europe.
Conversely, ETF share classes have so far failed to gather traction with both investors and promoters since there are only a small number of ETFs available in Europe—and these are actually share classes of existing mutual funds.
Nevertheless, from my point of view, both have the potential to become growth drivers for the European ETF industry. If this would mean they are the “next big thing” is in the eye of the observer.
That said, from my point of view it would be a big mistake if the ETF industry would start to launch private market ETFs, as these ETFs would try to provide liquidity into illiquid asset classes. In other words, the ETF industry would try to align a maturity mismatch with such products and the experience from other asset types such as real estate funds has shown that this doesn’t work. At least not over the long run or at large scale.
I think it would be a big mistake to risk the excellent reputation of ETFs by trying to launch extremely liquid products which are investing in, at the best, semi-liquid assets. That said, if this happens, I strongly believe that investors will be smart enough to understand the inherent risks of these products and simply avoid them.
This means I do not think that private markets will be one of the growth drivers for the ETF industry. Not in Europe nor globally.
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 Lipper or LSEG.
