Sometimes I play around with an AI tool to see how close the answers come to the reality. In the past I often smile or even laugh, since the answers were way off from reality or simply wrong. But over time I realized that the answers are getting better as the underlying models evolve further (and maybe because my prompting got better) and are more often on the spot. Today I asked the AI what the hottest topic in the European ETF industry is and the AI model came up with actively managed ETFs and gave a quite long reasoning for the answer. Since I found the answer very realistic, I asked the AI to act as a financial journalist and write an article on the answer. Since this article reflects most of my views, I want to share it with you.
So, here it is:
Active ETFs are rapidly emerging as one of the most important growth areas within the European investment industry. Once viewed as a niche segment, they are increasingly attracting the attention of asset managers, advisors, and investors seeking the benefits of active management within the efficient ETF structure.
The key question is no longer whether active ETFs will succeed, but how large they can become. A conservative outlook suggests active ETFs could account for 10-15% of the European ETF market within the next decade, representing €350-600 billion in assets. Under a more likely scenario, their market share could rise to 15-20%, implying assets of €600 billion to €1 trillion. In a particularly optimistic outcome, active ETFs could surpass €1 trillion and potentially reach €1.5 trillion.
Unlike the United States, Europe does not benefit from the same ETF-related tax advantages, meaning growth is likely to be more gradual. Nevertheless, several powerful trends are supporting adoption. Fee pressure on traditional active mutual funds continues to intensify, while investors increasingly favor the transparency, liquidity, and flexibility offered by ETFs. At the same time, wealth managers are incorporating more ETFs into model portfolios, and retail investors are becoming increasingly comfortable using ETF-based investment solutions.
Importantly, the real competitive battle is not between active and passive ETFs. Instead, active ETFs are challenging the traditional active mutual fund industry, which still holds the vast majority of actively managed assets in Europe. If even a modest portion of those assets migrates into ETF wrappers, the growth potential could be substantial.
Passive ETFs will remain the backbone of the European ETF market. However, active ETFs increasingly appear set to become its most dynamic segment. The critical question for the coming decade is not whether active ETFs will grow, but how much of Europe’s traditional active fund industry they will ultimately replace.
As said before, the main part of this post has been written by an AI, but since it matches my views, I left it as it was, to showcase that AI has become quite realistic in its assumptions and conclusions. If one would take the answer before this article into consideration, one could even say, AI could possibly replace external consultants since it is able to provide actual food for thought and practical advice. Nevertheless, the reader must be able to understand the output and the context since AI models sometimes deliver wrong answers.
Parts of the text and the picture at the top have been created with artificial intelligence.
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.
