Active ETF Adoption in Europe in Early Stages: Survey

Little over a third of European fund selectors allocate or are planning to allocate to active ETFs, according to a Research in Finance survey.

The European Fund Selector Survey, interviewing 900 retail, institutional third-party fund buyers and distributors, found only 21% of European selectors currently allocate to active ETFs, with a further 13% planning to do so by the end of 2024.

The figures underscore that the European active ETF market is very much still in its nascent stages, with the European active ETF market's $34bn assets under management still representing a small fraction of the $2trn wider market. Education is also likely to play a role in uptake, with 22% of the market completely unfamiliar with active ETFs.

BlackRock is projecting the active ETF market to reach $4 trillion by 2030, more than quadrupling in size from its current levels, according to a July report from the asset manager. Active ETFs listed globally reached a new milestone in July, with assets under management climbing to $974.3 billion, according to data from London-based ETFGI, an independent research and consultancy firm.

Regionally, Switzerland are they most positive on the product class, with 28% of investors surveyed allocating to active ETFs, followed by Spain and Germany at 27%, respectively.

Europe Active ETF Market Lags U.S.

The market is still well behind the U.S. in terms of market share, accounting for 31% of flows into active ETFs in May alone.

Research in Finance said several factors including lack of tax advantages, incompatibility of business models and lack of availability through European brokerage platforms.

ETF Stream’s Quarterly Buyer Barometer, which identified several reasons for fund selectors being hesitant to allocate to active ETFs.

Investors cited a limited range of products (25%) and tracking error (21%) as challenges to increase their exposure to active ETFs, with one ETF buyer also citing a lack of transparency surrounding the investment process as a reason for their reluctance to allocate.

This article was originally published by etf.com sister publication ETF Stream.