Industry Updates

Nine-tenths of European mutual fund managers to launch ETFs in next two years, survey finds

Some 92% considered expanding into their rival structure

Lauren Gibbons

ETF cash inflows

There has been a significant spike in European mutual fund managers planning to enter ETFs over the next two years, according to a survey by Blackwater.

The survey, which interviewed 127 European mutual fund managers, found 92% of respondents are planning to expand into ETFs or are planning to intensify their due diligence over the next two years, up from 9% in 2021.

The move comes after 62% of European mutual fund managers admitted they are concerned by the growth of ETFs, rising from 18% when respondents were surveyed three years ago.

Michael O’Riordan, founding partner at Blackwater, commented: “European mutual fund managers are increasingly concerned about the surge in ETFs, reflecting a notable shift from 2021.

“More managers now see the business case for incorporating ETF offerings, highlighting a growing recognition of potential benefits.”

Similar to the story in the US, ETFs in Europe have started to capture significant inflows from mutual funds in recent years.

According to data from Refinitiv, European ETFs saw €180bn more inflows than their rival structure in the first 11 months of 2023 as active mutual funds booked €91.9bn net redemptions.

“The primary concern for managers entering the ETF space is the cost of establishing an ETF business,” O’Riordan continued. “Despite challenges, there is strong momentum towards ETF integration, with a significant number planning to launch ETFs or intensify due diligence in the next two years, compared to a minimal interest in 2021.”

In addition, the survey found 77% of European mutual fund managers see active ETFs are an opportunity for them to expand into.

Over the past 18 months, AXA Investment Managers, abrdn, Horizon Kinetics and Investlinx have all launched active ETFs in response to growing demand while Robeco is set to enter the market this year.

Assets in active UCITS ETFs have increased five-fold since the start of 2015, from $6.1bn to $32.9bn by the end of 2023, according to data from ETFbook.

“Many perceive including some form of ETF offering as inevitable for competitiveness,” O’Riordan said. “Actively managed ETFs are viewed as an opportunity by a considerable portion of managers, indicating a willingness to explore innovative approaches.

“These findings underscore the need for adaptation and strategic foresight among mutual fund managers to navigate evolving market trends successfully.”

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