As we reach the 25 year anniversary of ETFs in Europe, few involved in the launch of Europe’s first ETF back in April 2000 could have predicted that assets would today surpass $2.3tn, with trades performed across 24 countries.
It took a long time for the European market to pick up on ETFs and by end 2010, assets had reached just $313bn. By 2019, ETF assets hit $1tn and since then have experienced double-digit compound annual growth. The latest figures for 2025 inflows show little sign of this growth slowing, with many market commentators bullish as to ETFs’ continued growth. JP Morgan forecasts that European ETF assets will reach $6tn by the end of 2030, while EY’s figure is a slightly more conservative $4.5tn. Whatever the case, this represents a near doubling of current asset levels.
An evolving product
Ongoing evolution has been an important factor in the growth of ETF products. The first ETFs housed a single share class, just passive (equity) products. Today’s ETF products have evolved far beyond passive into active and smart beta strategies, holding virtually all asset classes, including multi-currency, multi-share class; hedged, unhedged, accumulating and distributing. Some recent discussions have centred around ETFs holding alternative and real assets or tokenised versions of these, which may be the next step in their evolution.
Active ETFs
Active ETFs have witnessed significant growth, especially since 2020. Whilst still representing only 2.3% of the European ETF market, that they now account for 8% of the US market paints a positive picture. Many Issuers who are newcomers to the ETF space have chosen to launch active ETFs, as opposed to taking on the large incumbents in the low margin passive space. Some Issuers have been very successful with this strategy, gathering significant market share since entering the market.
Eamonn O’Callaghan, CACEIS Group Product Manager for ETFs, explains that “from an investor perspective, active ETFs provide an additional way to access active strategies outside of mutual funds. The lower price point of many active ETFs compared to mutual funds is another key growth driver. Finally, with increased market turbulence and an uncertain macroeconomic backdrop, investors are turning to active ETFs as a strategy to manage this risk and volatility.”
Growth of retail
Traditionally, retail investors have not been a popular cohort for buying ETFs in Europe. Conversely, adoption of ETFs by retail investors in the US is much deeper. Hence, many commentators have said that this pattern may emerge in Europe. Today, there are growing signs that retail adoption is reaching a tipping point. Many point to Germany as a key market for retail investors. Driven primarily by uptake in online savings plans, retail investors are using these vehicles to purchase ETFs. According to a recent report by the German fund association BVI, in Q1 2025 ETFs attracted €20.5bn in inflows, almost half of the €42bn inflows for the German fund industry.
Uptake is strongest among younger retail investors. This segment is less likely to trade in traditional mutual funds / investment channels preferring instead to buy ETFs through digital trading platforms and neo brokers. As a follow on, PwC predicts a global wealth transfer of $68tn over the next 10 years. As this group considers where to invest this cash, ETFs may benefit from a significant boost in asset inflows.
Regulatory change
In December 2024, Luxembourg’s CSSF announced a policy change allowing active ETFs to disclose their portfolio holdings only once a month. Previously, ETFs had to disclose their holdings on a daily basis which has for some time been cited as a concern by mutual fund managers who are considering entering the ETF market. Specifically, concerns raised related to disclosing their “secret sauce” or enabling others to “front run” positions in the portfolio. In April 2025, Ireland’s CBI, following engagement with the industry, followed suit and will permit active and passive ETFs to disclose holdings at least on a quarterly basis.
Permitting semi-transparent ETFs is likely to be attractive to asset managers noted above. It provides for a structure with reduced transparency which may be sufficient to ease their concerns and facilitate their entry into the ETF market. From an investor perspective, if a new set of Issuers enters the market, it will provide a new and broader set of investment vehicles and increase investor choice.
New entrants and new ways to enter the market
Newcomers to the ETF market continued with managers including Columbia Threadneedle, American Century, Schroders, Jupiter, Guinness Atkinson and Nordea announcing their intention to enter the European market. In addition to these, Dimensional Fund Advisors are planning their market entry and US semi-transparent Issuers Precidian and Blue Tractor are positioning for business in Europe.
The methods by which asset managers can enter the market has also expanded. In the white label space, there has been a number of newcomers and now there are a broad range for asset managers to select from if they opt for the “rent” option when launching ETFs.
Launching an ETF share class within a mutual fund is another route which managers can consider. This has seen significant uptake particularly in Luxembourg with the CSSF reporting that there is €80bn in assets in this structure. CACEIS is having a number of conversations with mutual fund managers about launching this. It should be noted that the Group is already supporting this structure – in September 2024 Fair Oaks launched an ETF share class in their Luxembourg-domiciled Fair Oaks AAA CLO UCITS, the first ETF in Europe offering investors access to CLO (Collateralized Loan Obligations) exposure, a significant milestone. “Within our business in CACEIS, we administer €125bn in ETF assets over 167 funds and 286 share classes which puts us in the top 5 ETF administrators in Europe. We are connected to over 20 of the European market’s Authorised Participants (APs)” said Eamonn.
To conclude
As we consider H2 2025 and beyond, many feel that the ETF industry will continue to enjoy robust growth. ETFs will continue to evolve due to product innovation, technology enhancements and increased investor adoption. The entry of new asset managers will increase competition, investor choice and the complexity of products available.
