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NEWSLETTER

European ETFs set to see accelerated growth

BlackRock published the findings of its research with YouGov this week 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.

The insight sums up easily into steady growth for our sector, with three key trends: 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.

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.

The 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. 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 a high combined growth rate at 42 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.

Our data partners Trackinsight published their fourth annual global ETF outlook this week revealing that investors are increasingly open to active strategies; the percentage of respondents already using active ETFs is higher than ever, and switching from mutual funds to active ETFs is trending. Nearly 80 per cent of respondents in the Americas stated they would be more inclined to invest in an active strategy if packaged as an ETF rather than a mutual fund.

The passive versus active debate is a ‘thought experiment’ according to Joy Yang, Head of Index Product Management at MarketVector Indexes, one that provides a natural balancing force when participants find alpha opportunities. In our interview with her this week, she said: “Passive managers don’t generally focus on the fundamental price, whereas active managers tend to think about the fair value of a company and the price at which it is buying and selling,” she says. “Now we are seeing more active managers coming into this structure. I think the inflow or rise of active managers choosing the ETF structure is a good thing, as it is a more efficient structure. They are bringing their strategy to a wider market, but along with that comes the requirement of suitability where the end investor understands the product they are buying.”

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Beverly Chandler, Managing Editor

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