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April 11, 2024

Happy Birthday ETF Industry—A Brief History of the European ETF Industry

by Detlef Glow.

On April 11, 2000, the first two exchange-traded funds (ETF) based on the EURO STOXX 50 and the STOXX Europe 50 were listed on Deutsche Börse in Germany. With this listing, Merrill Lynch International brought a product to Europe which had been established in the U.S. since 1993. In addition to Germany, the trading of ETFs also began in Sweden, Switzerland, and the U.K. over the course of the year 2000.

Even as the first reactions to these new products were positive, no one at that time really expected the future success that ETFs would experience. The following is a summary of major developments for European ETFs over the past 24 years.


The first year after launch was rather quiet as far as the trading and the listing of new products. This changed over the course of 2001, as State Street launched the first sector ETFs which enabled European investors for the first time to speculate on the different sectors of the MSCI Europe by overweighting or underweighting specific sectors in their portfolios. In addition, investors could use these products as a proxy to implement exposure to a specific sector within their portfolio without the need to select single stocks. Also, the French ETF promoter Lyxor launched the first so-called synthetic ETF that used a swap to track the risk/return profile of the underlying index (EURO STOXX 50).



With the launch of the first bond ETF in 2003, Indexchange (which is now a part of iShares), enabled investors to buy specific bond markets with a single security. By looking at the assets under management, I would assume that these products did not meet the expectations of the fund promoter, as investors were at that time more focused on equities since the equity markets had started to rally again after the tech bubble burst earlier in the decade.



As an increasing number of investors—especially in the institutional segment—used ETFs in their portfolios, the demand for access to new markets increased. As a result, the promoters of ETFs launched the first emerging markets equity ETFs, as well as ETFs investing with a geographical focus in real estate investment trusts (REITS) over the course of the year.

The increasing popularity of ETFs in Europe also fueled the growth within the wider ETF ecosystem. One example for this was the launch of Flow Traders, a technology-enabled liquidity provider for various exchange-listed financial products, including ETFs. An increasing number of liquidity providers is good news for investors, since this means that the competition of the market makers is getting tougher, which will under normal circumstances lead to closer spreads and a higher overall liquidity of the underlying products under all market conditions.



The introduction of the UCITS III mutual fund regulation in 2005 was a significant change for ETFs since this regulation allowed increased flexibility in terms of holdings within and across funds and also in the use of derivatives. Specifically, it allowed larger, and more, investment into ETFs that are UCITS. Prior to UCITS III, a UCITS fund could only at most invest 5% of its assets in other UCITS funds. Under UCITS III guidelines a fund was allowed to invest up to 20% of its assets into another UCITS fund as long as its investment does not account for more than 25% of the net-asset value (NAV) of the fund into which it is investing. The fund can invest into other UCITS funds following similar guidelines. With this change in regulation ETFs became an attractive tool for all kinds of fund managers since they now could use ETFs as building blocks in their portfolios to gather exposure to a specific sector/region/market.

UCITS III also allowed, for the first time, the use of listed and over-the-counter (OTC) derivatives as part of the way a fund is managed rather than for efficient portfolio management only. This regulatory change triggered the trend toward creating swap-based (synthetic) ETFs.

In 2005, the first strategy ETFs were launched by Lyxor ETF in Europe. These products enabled investors for the first time to implement a specific investment strategy with an ETF. The new strategies ranged from leveraged long strategies to covered-call strategies. In addition to this, EasyETF (a joint venture of AXA Investment Managers and BNP Paribas) launched the first commodities ETF.

Even as the trend toward the so-called smart beta or factor investing ETFs started years later (approximately in 2012/2013), the first ETFs that enabled investors in Europe to capture risk premia from different factors were launched in 2005 when Lyxor launched the first ETFs to capture the small cap, growth, and value premia, while iShares launched the first ETF with a dividend strategy.



Commodities ETFs started to become a success when ZKB launched the first ETFs on gold, silver, and platinum which were fully backed by the specific precious metals in 2006. These products were not only fully backed, they were also exchangeable—the investors could claim for physical delivery of the metal.

The trading in ETFs in Europe evolved further when US broker Jane Street entered the European market in 2006, since this meant that another major liquidity provider enriched the competition for the trading in ETFs.



At this point, the only missing asset type in the ETF segment was money markets. This gap was closed in 2007 when db x-trackers launched an ETF on the EONIA money market index. In the awakening of the upcoming financial crisis, these products immediately found favor with investors in Europe. In addition to this, the range of strategy ETFs was expanded by so-called short strategies—ETFs that enable investors to take advantage of decreasing equity markets. We also witnessed the launch of new strategies in the bond and alternatives sectors, as the first ETFs using credit spreads as well as currency pairs as underlying hedges were introduced. In addition, Lyxor launched the first ETF with a multi-factor strategy (RAFI).

2007 also marked the first major corporate action since the German ETF promoter Indexchange (part of Hypovereinsbank – HVB) was bought by Barclays Global Investors (BGI) and renamed Barclays Global Investors (Deutschland) later during the year, while the respective ETFs were renamed with the iShares branding (the ETF brand of BGI).


Graph 1: Assets Under Management in the European ETF Industry by Asset Type (in billion EUR)

Assets Under Management in the European ETF Industry

Source: Refinitiv Lipper



As a result of the increasing popularity of ETFs in Europe, assets under management hit the €100.0 bn mark for the first time in April 2008.

Even as the trend toward mixed-assets products was not in place in 2008, we saw the launch of the first mixed-assets ETF by db x-trackers during the tough market environment of the financial crisis.

The increased popularity of ETFs was shown by the fact that ETFs enjoyed inflows over the course of the year, while mutual funds faced heavy outflows.



In 2009, db x-trackers launched the first ETF that invested in hedge funds. Even as this segment is lacking in transparency and is highly illiquid, the respective ETF showed the same intraday liquidity as all ETFs. With regard to this, investors did not have to deal with the issues arising from the limited liquidity of a hedge fund when they used this product. Even as Marshall Wace and UBS also launched ETFs with hedge fund indices as underlying in 2010, these products have so far not gathered a lot of interest from European investors.

At the end of May 2009, AXA Investment Managers announced that it would hand its stake in the EasyETF joint venture and the operational management of its 22 ETFs to its partner BNP Paribas Asset Management.

2009 also marked the year of the second major corporate transaction, as the U.S. asset manager BlackRock bought BGI, the asset management arm of the British Barclays Bank. This deal included iShares and created the world’s biggest asset manager.



On June 1, 2010, the European ETF industry witnessed the launch of the one-thousandth ETF. 65 of these 1,000 ETFs have been closed between April 2000 and June 2010. Overall, 436 of the 1,000 ETFs were still active at the end of December 2021. These ETFs were accounting for €476.5 bn, or 35.82%, of the overall assets under management of the European ETF industry as of December 31, 2021.



During the market turmoil of the euro crisis in 2011, ETFs were once again the product tof choice of European investors as they again showed inflows, while their actively managed peers suffered heavy outflows. With regard to this, it seems that European investors prefer ETFs over actively managed funds in times of market turmoil.

In the aftermath of the euro crisis, European ETF promoters started to launch bond funds that enabled investors to invest in specific segments of the bond markets. The opportunity to avoid or to take the risk from specific market segments or use these ETFs as proxies for single bonds—for example, avoiding the risk from a single bond by buying a basket of bonds with the same or very similar provisions—led to a very dynamic growth for bond ETFs overall.



The next step to enhance the coverage of ETFs focused on asset classes and investment themes was taken by Lyxor in 2012, as the French promoter launched the first ETF that enabled investors to use the S&P 500 VIX Futures Index in their portfolios.

In May 2012, the global pioneer of index investing, Vanguard, entered the European ETF market with the launch of five UCITS ETFs (four equity ETFs and one bond ETF).



The year 2013 started with a big bang since the fourth largest promoter of ETFs in Europe, Credit Suisse, announced in January that it had sold its ETF business (XMatch) to BlackRock, which integrated the Swiss Credit Suisse ETF platform as a local offering into its iShares product offering.



On August 1, 2014 ESMA published its “Guidelines for competent authorities and UCITS management companies – Guidelines on ETFs and other UCITS Issues” which made clear that all ETFs which are regulated by UCITS have to include the label “UCITS ETF” in their fund name to make a clear distinction between ETFs and other fund products, as well as between ETFs regulated under the UCITS framework and ETFs regulated by other regulatory frameworks. The aim of this label for ETFs was to increase the transparency of the European fund landscape and to foster the trust into the UCITS brand inside and outside the European Union. In addition, the guidelines contained an article on active ETFs way before these kind of products became a topic of wider interest in the European ETF industry.

On September 17, 2014, the Central Securities Depositories Regulation (CSDR) came into force. The aim of CSDR is to harmonize certain aspects of the settlement cycle and settlement discipline. One of the major achievements of CSDR was the introduction of the T+2 settlement cycle in the EU.



The U.S. ETF promoter VanEck launched its first two UCITS-compliant ETFs, listed in London, seven years after the firm opened its first European office.



In 2016, the assets under management in the European ETF industry surpassed €500.0 bn, ending the year with overall assets under management of €514.5 bn.



The takeover of Source by its rival Invesco PowerShares in April 2017 marked the next major corporate action in the European ETF segment, as the eighth-largest ETF-promoter in Europe got bought by the sixteenth-largest ETF promoter.

Later in the year, Hector McNeil and Nik Bienkowski founded the ETF white label platform HANetf. While white label platforms have been established in the mutual funds space for a long time, HANetf is the first full service white label platform in the ETF space. This launch shows that the whole ETF ecosystem is advancing while the industry is maturing.

2017 ended as it started, since Legal & General Investment Management (LGIM) announced in November that they acquired the ETF platform “Canvas” from ETF Securities.

The success of the European ETF industry raised a lot of interest from the promoters of mutual funds who looked at ETF market entry as a way to enhance their success. As such, the market entry of Fidelity, Franklin Templeton, and JP Morgan was not surprising, since these asset managers were already involved in the U.S. ETF market. Nevertheless, the entry of active asset managers in the ETF market has the potential to become a game changer for the whole asset management industry.



Since all major asset classes and markets were already covered by ETFs, it is not surprising that ETF launch activity has shifted from a focus on plain vanilla indices to sectors, market segments, or trends. This activity was fueled by the demand for ESG products, as well as demand for specific market sectors in the bond and equity segments.

In July 2018, Societe Generale acquired ComStage, the ETF arm of German lender Commerzbank to consolidate the position of its ETF arm Lyxor ETF as one of the leading ETF promoters in Europe and to reinforce its presence in Germany, one of the key markets for ETFs in Europe.

In addition, New York/London-based ETF promoter VanEck bought the Dutch ETF promoter Think ETF Asset Management BV to broaden its ETF portfolio for the European and international markets.



On January 16, 2019, the global ETF industry got the sad news that the father of index investing, John Clifton “Jack” Bogle, died at the age of 89. Bogle founded The Vanguard Group back in 1974 and created the “First Index Investment Trust” in 1976. This mutual fund was the first index mutual fund available to the general public. John C. Bogle’s idea for this fund was that instead of beating the index and charging high costs, the index fund would mimic the index performance over the long run—thus achieving higher returns with lower costs than the costs associated with actively managed funds.

With net inflows of €106.7 bn, the European ETF industry enjoyed inflows of more than €100.0 bn for the first time in history. Additionally, assets under management reached €870.0 bn at the end of the year, which marked a new all-time high.



The year 2020 started with rough market conditions as the coronavirus put the world in lockdown mode, which lead to the roughest recession since the 1930s. This being the case, 2020 had the potential to become the first year with net outflows since the inception of ETFs in Europe.

In March 2020, Credit Suisse made its return as promoter to the European ETF industry with the launch of three UCITS ETFs domiciled in Ireland.

In addition to Credit Suisse, New York-headquartered Global X ETFs (member of Mirae Asset Financial Group, Seoul) entered the European ETF market with the launch of its first UCITS ETF to expand its global footprint as ETF promoter for thematic ETFs.



As the year 2021 started, the European ETF industry hit the next milestone as the assets under management in ETFs reached more than €1.0 tr at the end of January 2021. While it took the European ETF industry 16 years to gather the first €500.0 bn in assets under management, the promoters of ETFs needed only five years to double that amount. These numbers depict the dynamic growth pattern of the European ETF industry.

In June 2021, Amundi announced that it will acquire Lyxor ETF from Societe Generale. This transaction came shortly after Lyxor ETF finished the integration of ComStage and shuffled the league table of the largest ETF promoter in Europe around, since the fifth-largest ETF promoter in Europe bought third-largest ETF promoter in Europe, which brought Amundi ETF in the position of the new second-largest ETF promoter in Europe.


Graph 2: Fund Flows in the European ETF Market (in billion EUR)

Annual Estimated Net Flows in the European ETF Industry

Source: Refinitiv Lipper


At the end of 2021, the European ETF industry hit another milestone as the annual inflows into ETFs in Europe (€161.0 bn) topped the €150.0 bn mark for the first time in history.



The competition in the space of white label platforms heated up over the summer of 2022 as Goldman Sachs and Waystone launched respective services in Europe. The launch of these platforms might be seen as a sign for an increasing demand for white labeling from smaller asset managers or fund boutiques who want to enter the European ETF market but don’t have the capacity to build their own ETF platforms, since setting up a fully-fledged ETF business can be a quite expensive exercise.

In September 2022 AXA IM re-entered the European ETF landscape after a 13-year absence in September 2022 with a range of active managed ETFs.

While AXA IM re-entered the European ETF landscape, UniCredit closed it last two ETFs and left the European ETF industry in November 2022.



In March 2023, US Bank entered the European ETF servicing market as new custodian and will offer fund administration, transfer agency, depository and global custody, as well as specialized European ETF services.

At the same time Horizon Kinetic, a U.S. based ETF promoter, launched its European Branch and became the first customer of US Bank in Europe.

In June 2023, UK-based circa5000 entered the European ETF market as new promoter for sustainable ETFs, which describes itself as impact investing specialist. This launch marks the first market entry of a highly specialized investment boutique in the European ETF industry.

On May 16, 2023, the patent that permitted Vanguard to create ETF share class from existing mutual funds expired and some European fund and ETF promoter such as HSBC announced their interest in launching such products in the near future. The expiration of this patent might become a key driver for the launch of active ETFs in Europe since this enables all asset managers to use ETFs as distribution wrappers for their existing mutual fund product ranges.

At the end of June 2023: Equity ETFs held for the first time more than €1.0 tr (€1,014.0 bn) in assets under management at month end. This milestone is quite remarkable since the whole European ETF industry passed the €1.0 tr in assets under management mark only 18 months earlier.

In August 2023, iShares launched the first suite of four fixed maturity bond ETFs in Europe. The new ETF range enables investors to gather exposure to investment grade corporate bonds from various countries and sectors denominated in U.S.-Dollar and euro with a fixed maturity date as of December 2026 and December 2028.

On August 15, 2023, Jacobi Asset Management launched the first spot Bitcoin ETF in Europe. The Jacobi FT Wilshire Bitcoin ETF is domiciled in Guernsey and listed on Euronext Amsterdam. The ETF only available for qualified investors.

On September 19, 2023, ARK Invest LLC (“ARK Invest” or “ARK”), the parent of ARK Investment Management LLC, has acquired Rize ETF for £5.25m. This transaction can be seen as a major step for the global expansion strategy of ARK Invest, as this will enable them to launch UCITS ETFs on an existing ETF platform with an existing distribution network. This that any new launched ARK ETF can immediately be distributed across Europe and in other parts of the world (Latin America and Asia), where UCITS is an acknowledged regulatory standard. As a result of the transaction, the Rize ETF platform will be renamed to ARK Invest Europe.


All data sourced from the Refinitiv Lipper database if not stated otherwise. This overview may miss some important events within the wider ETF ecosystem. Therefore, the author would be grateful for any hint with regard to missing milestones in the European ETF industry.

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


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