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New investors accelerate growth in European ETF market

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New data from YouGov commissioned by BlackRock shows a wave of ETF adoption from the next generation of European investors. The firm writes that the research, which explores the age, investment experience and market location of potential ETF investors across 14 European countries, offers new insight into current and future European ETF ownership. 

Respondents were asked to signal what if any investment vehicles they invest in today, and what they intend to use to invest in the next 12 months. Three key trends are clear, BlackRock says. ETF markets across Europe have the momentum to grow at pace; ETFs are increasingly being used by people as a starting point when investing; ETF investors are getting younger.

Jane Sloan, EMEA Head of iShares & Index Investments says: “Assets on European digital investment platforms have grown at 20 per cent per annum since 2019 to almost USD2 trillion as at the end of 2022. ETFs have helped to fuel this growth and we continue to see strong acceleration in ETF adoption by younger investors, aged 18-34, and expect that over the course of 2023, this group will account for 54 per cent of new ETF investors. 41 per cent of these are expected to be first time investors who have learnt about investments through these platforms and value the simplicity and low-cost of ETFs.”

Key growth markets

In terms of market size, Germany already represents the largest number of ETF investors in Europe, due to the evolution of digital distribution platforms and increasing popularity of ETF savings plans. There is still room for growth, BlackRock says. Just over two million Germans, who today don’t currently invest in ETFs, indicated that they are very likely to invest using an ETF in the next 12 months, representing a potential relative growth of 22 per cent in the German ETF market.

Countries with low ETF market penetration represent the greatest growth potential. In Spain and Portugal, just over a million people are very likely to invest using an ETF in the next 12 months, representing a relative growth of 64 per cent in the combined Spanish and Portuguese ETF markets. France, Belgium, and the Netherlands show high a high combined growth rate at 42 per cent, and the UK growth rate is anticipated to be 56 per cent.

The number of Italian ETF investors is project to grow by over 800,000 new ETF investors, representing a 39 per cent growth in the Italian ETF investment market.

UK focused stats

UK growth rate of ETF adoption is anticipated to be 56 per cent in the next 12 months, and the next wave of ETF investors is still skewed towards men. Amongst respondents who own ETFs today, in the UK, 81 per cent are male and 19 per cent are female. This is a wider gap when compared to the EMEA average where 75 per cent of today’s ETF investors are male and 25 per cent female.

However, the gender gap is set to close: of those, who are not ETF investors today but are very or fairly likely to be within the next 12 months, in the UK, 74 per cent are male and 26 per cent are female.

Amongst respondents who own ETFs today, in the UK, 41 per cent are 18-34 years vs 37 per cent aged 35-54 years old and 23 per cent over 55.

The 18 – 34 year-old cohort is on par with Spain and the Netherlands, all of which are second only to Denmark where 55 per cent of ETF owners today fall within this age group

Of those, who are not ETF investors today but are very or fairly likely to be within the next 12 months, in the UK, 65 per cent are aged 18-34 years old. This is the second highest proportion in Europe, behind Denmark (78 per cent) but ahead of Sweden (51 per cent) and Germany and France (47 per cent each).

ETFs as an entry to investing

ETFs provide an easy and cost-effective way for investors to begin investing, BlackRock writes. With low associated fees and minimum investment contributions, investors can include a broad range of exposures into their investment portfolios, made even more accessible through an evolving selection of digital platforms.

The data indicates that the accessibility of ETFs make them especially attractive to first time investors. On average across Europe, of the next wave of ETF investors, 41 per cent will have never invested before. Of the two million upcoming German ETF investors, just under half (43 per cent) do not hold any investments and indicated that they are “very likely” to start investing using ETFs.

ETF investors getting younger

Generation Z and Millennials are emerging as a driving force for growth in the European ETF market, whereas currently, ETFs are largely owned by the 35-54 age group. Investors aged 35+ represent 63 per cent of current ETF owners, according to YouGov. BlackRock believes that this younger cohort, now participating using ETFs, could be as a result of them being more comfortable with self-directed decision making and the emergence of online investment platforms. In Europe, the digital market now stands at almost USD2 trillion in assets.

Across Europe, of the next wave of ETF investors, 54 per cent will be aged between 18 and 34 years, compared to only 32 per cent of new investors aged 35-54. This represents a reversal in ownership as those aged 35+ will represent only 46 per cent of ETF owners. In Germany, the potential two million new ETF investors will represent a 34 per cent increase in the number of 18–34-year-olds investing using ETFs.

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