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Tim West, EY
Tim West, EY

European ETF market set for growth, reveals EY report 

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According to recent research by EY Ireland, the European ETF market grew by 28 per cent in 2023, reaching over USD1.8 trillion in assets under management (AUM). 

And there’s more progress to come: the study revealed that the market is forecast to grow 15 per cent annually over the next five years, reaching over USD4.5 trillion by 2030. 

The firm’s report, Elevating ETFs – digital assets, market trends and sector trajectories (which looks at ETFs globally) noted that despite inflows dropping in 2023, ESG-focused ETFs are expected to remain a long-term investment theme. As at the end of 2023, USD345 billion had been invested into European ESG ETFs. This represents less than five per cent of the global market and just 19 per cent of the European market, indicating potential for growth, says EY.  

Tim West, a partner and UK wealth and asset management, alternative-investment leader at EY UK says: “What’s interesting to me is what’s driving the growth of ETFs. Maybe it’s a combination of the rise of active ETFs, which is a huge theme at the moment, driving this current wave of new entrants and interest and the effect that has on distribution and the dynamics of how ETFs are bought or sold.”

By way of introduction, West explains: “I’m the ETF lead for the UK firm, but we’re very much a European practice here at EY. Given how important both Luxembourg and Dublin are to the ETF ecosystem, I work very closely with my partner colleagues in those locations too.”

West has more than 30 years’ industry experience, including roles as chief executive and chief operating officer for global asset managers, working in Europe, North America and in the Asia-Pacific region. 

Reflecting on the rise of active funds, the study reports that the active ETF market “began to accelerate in 2020 and has grown 250 per cent since then.” The research also reveals that the market ended 2023 with USD700 billion AUM and now represents more than six per cent of the global ETF market.  US providers are said to have propelled the growth and the report observes that many US managers are currently looking to Europe as a possible growth opportunity.  

Assessing popular trends in US active ETFs, the report highlighted low-cost versions; potential expansion of crypto exchange-traded products; active equity income funds; and thematic active ETFs. It also pointed to the emerging practice of firms raising the profile of their ETF portfolio managers, echoing the brand association of Cathie Wood with ARK.  

AI is another key theme highlighted in the research, which EY says is “reshaping the asset-management industry”. The study states that: “AI-powered ETFs have the potential benefits of being quicker to identify and react to market events than human managers in active ETFs.”

Commenting on the impact of AI on the ETF sector, West says: “At EY, the view we tend to take is that you’ll succeed with AI if it’s assisting you, as opposed to the other way round. I think it’s important that we keep a human hand on that tiller.”  

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