Industry Updates

European pension funds increasingly turn to ETFs

Based on BlackRock's analysis of its ETF ownership data

Lauren Gibbons

Pension

Asset owners such as pension funds and insurance companies are turning their attention to ETFs, as these investors contributed to a quarter of BlackRock's ETF inflows last year.

According to BlackRock's analysis of its iShares ETF ownership data, of these inflows, 25% were first time users of BlackRock’s ETFs.

This trend was mirrored in 2023, with new users accounting for 25% of institutional inflows into BlackRock’s ETFs and since 2020, there has been a 29% compound annual growth rate.

Additionally, the analysis found that around 40% of the largest pension funds in each European market use iShares ETFs.

Despite pension funds seemingly being at odds with the ETF structure – typically have long-term investment horizons which may not require the intraday liquidity that ETFs offer – 16 European central banks now rely on BlackRock ETFs, further underscoring their appeal to pension funds.

The analysis predicted a huge uptick in European defined contribution pension schemes, with assets projected to rise from $4trn today to $12trn by 2030.

This was tied to reforms in countries like the Netherlands, which will see $1.6trn of pension assets move from defined benefit to defined contribution.

In 2023, Japan’s Government Pension Investment Fund (GPIF), the largest pension fund in the world, allocated $3.7bn to track the Morningstar Japan ex-REIT Gender Diversity Tilt index, following a previous allocation of $3.4bn in December 2020 to a similar broad developed markets index.

More broadly, Dutch civil service pension scheme ABP shifted its liquid assets to passives, marking a major shift for the last Dutch provider that invests fully actively.

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