Exchange Traded Funds: The next stage of growth

CACEIS and Funds Europe have recently published a joint survey titled “Exchange Traded Funds: The next stage of growth”, which looks at the global prospects for the sector in 2026 and beyond. 

Many ETF market surveys take a retrospective view, posing questions looking back over the previous year’s performance. Such an approach certainly provides very useful insights into that historical period but is limited as the results only look to the past. With this survey, we sought to pivot the conversation and take a forward-looking approach so that our insight will add to and compliment what is already in the market. This new survey provides valuable insights into the key concerns for asset managers and ETF buyers in the current market and how it is likely to evolve over the next 5 years.

From a macro-economic perspective, the financial markets are witnessing considerable volatility arising from numerous sources – changing government policies, market protectionism, trade tariffs, regional conflicts, high equity valuations, and linked to this, discussions around a potential correction to name but a few. It’s with this backdrop that investors are seeking to identify investment opportunities and create wealth, asset managers are looking at ways to grow assets and generate alpha, and governments, especially in Europe, are keen to boost levels of self-directed investment.

Since the early noughties, assets in ETFs have been increasing. Compound annual growth over a 10-year period is up 15% and significantly higher (up 35%) for active strategies.  A particularly notable statistic is that if you look at ETF asset growth, it has doubled in size every five years. Few investment vehicles can make this assertion and many look on with envy. Buyers of ETFs in Europe have traditionally been institutional and in recent years we have witnessed increasing interest outside of this segment, namely retail.  There is a steady stream of new asset managers entering the space and launching ETFs for the first time, or existing (US or Asian) ETF Issuers launching products in Europe in order to expand sales and distribution channels.

Product evolution is a second important theme and intertwined with growth. Take a step back in time and the first ETFs housed a single share class, passively tracking vanilla equity indexes - this was the status quo for many years. Today, ETFs have evolved, offering active and smart beta strategies, holding virtually all asset classes, multi-currency, multi-share class; hedged, unhedged, accumulating and distributing. Recent conversations have centred around ETFs holding alternative and real assets or even derivatives to mitigate against downside risk. Topical conversations involve themes such tokenisation and out of hours or 24/7 trading.

But alongside these core themes some questions start to arise. Will the growth continue, or will it taper? What will the product set evolve into? And which asset classes and strategies will be of most interest to ETF buyers?

The purpose of our survey with Funds Europe is to answer these, and other related questions – and to try and gauge from the responses of Asset Managers and ETF buyers where the market going, and if the expansion and evolution we have witnessed over the past 25 years, will continue.

Many of the responses give some very interesting insight, and some the survey’s stand-out findings are:

Continued growth – virtually all respondents indicated that they expect the ETF industry to continue to grow.  In fact, 99% of respondents expected continued growth and the remaining 1% only expect it to flatten out. 

Continued growth, continued – 94% of asset owners indicated that they will at least maintain the current level of ETF allocation, with 61% expecting to invest more and 33% looking to keep the investment allocation the same.

Launch strategy – Asset Managers said that the top reasons to launch ETFs are distribution expansion, investor demand and competitive pressure. 

Capital origins – when buying ETFs, investors are re-allocating cash from active mutual funds (73%) and passive mutual funds (55%).

Investor profiles - 91% expect changing demographics and increased participation by millennials and Gen Z to influence inflows into ETFs.

The ETF market is benefitting from certain macro tailwinds that are often interconnected. At the EU level, there is a common objective to promote investment into domestic capital markets, which ties in with the Savings Investment Union (SIU). Europeans are great savers but not great investors, and with an estimated €70 trillion sitting in bank accounts, policy makers are keen to direct this low yield capital into more productive investment vehicles.  

With the retail segment making up some 15% of the market, this area offers the most significant opportunity for growth. In the US market, some commentators estimate that the retail segment represents up to 45% of the total. This demonstrates the growth potential of the segment if European savers can be enticed into buying ETFs.

Over the next 10 years, the global wealth transfer is estimated to be in the region of €100 trillion as family assets is gradually passed on to the younger generation. Many believe that ETFs are the most likely investment vehicle to benefit from the capital this cohort inherits.

One area that could dampen the sector’s positive growth trajectory is education. A number of different sources report that financial literacy among retail investors is low. This will need to be a focus not just for policy makers, but for all sectors of the investment community if investment from retail is to grow.

Looking at market forecasts, ETF compound annual growth rates (CAGR) have hovered around 15% over the last two years. With closing assets as at end July 2026 of €3.7tn, and applying a 15% CAGR over 10 years you arrive at €13.0tn. If ETF assets continue to double every 5 years this would amount to €12.9tn. Interesting how closely aligned these two are and around this level is where many forecasters see the market going.

To view the CACEIS /Funds Europe report click here, or paste this link into your browser Exchange-traded funds: The next stage of growth 2026 - Funds Europe