June 7, 2021

Unwrapping the European ETF Industry

by Detlef Glow.

When exchange-traded funds (ETFs) were introduced in Europe in the year 2000 it was hard to predict that these products would write an unbroken success story for more than 20 years. This becomes especially true when one is taking into account that the last two decades saw so many so-called “black swan events” in the financial markets—like no other period before—and each of these events had the power to derail the ETF industry from their growth track. But ETF assets increased during rough market periods—times during which common sense would dictate that active managers would have an advantage over passive products.

Not all ETF promoters, however, were successful. Some left the scene without being able to raise significant amounts of money with their products, while others were bought by competitors. In addition, we also witnessed a number of ETFs weren’t able to attract investors’ interest and were closed by their promoters. Even while these two topics sound like we may see a wider consolidation in the European ETF industry, these are just signs that the market has matured. We’ve seen the same pattern within the active fund management business. Nevertheless, the European ETF industry is highly competitive, and the promoters have to do their best to adopt to the changing market environment and to fulfill the needs of investors who are looking for tools to implement their asset allocation views as exactly as possible within their portfolios.

That said, the success of the European ETF industry may also urge active managers to launch ETFs sooner rather than later, especially as the regulatory requirement to disclose the ETF portfolio on a daily basis might be eased in the near future.

With regard to the above, this market study of the European ETF industry shall provide the reader with an in-depth analysis of the ETF ecosystem in Europe and deliver the market intelligence needed to make educated decisions within a constantly changing market environment in which ETFs have become a household product for European investors.

The views expressed are the views of the author and not necessary those of Refinitiv or LSEG.

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