In the 15 years since the first ETFs were listed in Europe, a total of 2,269 exchange-traded products have been launched across 22 countries by 45 different providers.
The industry is now worth $494bn (£333.9bn), and despite recent stutters in the European economy, Rachel Lord, head of EMEA iShares, sees the upward trend continuing beyond $1tn (£675.9bn) by 2019, within a projected global market of $6tn.
“The growth in uptake of ETFs in Europe is far higher than the global average, and is a major contributor to the shape and size of the global market,” she said. “ETFs domiciled in Europe continue to grow rapidly, despite recent economic and geopolitical uncertainties.
“There have been many developments over time, especially from funds tracking niche and alternative markets like commodities and real estate. Alongside ongoing innovation in areas such as smart beta, we believe investors will continue to turn to ETFs when choosing their core equity and bond market-weighted investments.”
In an ETP landscape report, BlackRock’s ETP research team predicted that European fixed income ETFs will be a key driver of wider industry growth, based on £27bn inflows in the past 15 months, alongside core exposures and smart beta.
Peter Sleep, senior investment manager at Seven Investment Management, believes that actively-managed funds have not matched expectations in the past decade, which could help the European ETF space mirror the expansion of its US counterpart.
“This is part of a continuing trend towards low cost passives,” he explained. “A significant part of US investments is now in passives and Europe is going to catch up.
“There is perhaps an awareness that active management has not been great over the last 10 years, and the opportunity set for managers to switch into ETFs, tracker funds and futures has increased exponentially. As a result [the passives industry] is seeing an increasing market share.”
He continued: “There are $10tn of investable assets in Europe – the ETF industry doesn’t need a good economy to expand, it just needs a bigger market share.
“There has been a pretty pronounced trend in the US [of an increasing ETF market share] and Europe is about five years behind. There are various structural impediments, such as ETFs not being as liquid in Europe as they are in the US and the market being fragmented. But based on the US experience, and if the market expects European equities to return 5-7% over time, then it will be a continuing trend.”
