Active ETFs gain momentum in Europe with €9.3bn inflows

Following a notable surge in the United States, stock-picking ETFs are gaining traction among European investors, as active exchange-traded funds (ETFs) have amassed €9.3 billion since last year’s start.

These ETFs, diverging from passive index-tracking strategies, rely on the discernment of managers to select stocks. The upswing in Europe, reported by Morningstar Direct, signals a shift in investor preference, with active ETFs witnessing continuous inflows for seven consecutive quarters, boosting total assets to €30.7 billion.

The trend contrasts starkly with the outflow of funds from Europe’s active mutual funds, which have experienced withdrawals in six of the past seven quarters.

Traditional active fund managers, who have seen €340 billion exit the €8 trillion held in mutual funds, may find a lifeline in active ETFs despite the necessity of reduced fees.

The US market, where ETFs benefit from more favourable tax treatment, has led the charge with actively managed funds representing 5% of the vast $7.5 billion market. They’ve also captured 25% of this year’s net inflows, as per JPMorgan Asset Management (JPMAM).

Europe has been slower to adopt, but JPMAM’s success through its top-ranked US and Global Research Enhanced Equity (ESG) Ucits ETFs, among other entries in Morningstar’s flow charts, suggests a burgeoning trend.

Other investment houses like Fidelity International and Pimco are following suit, seeing positive inflows into their active ETFs.

© 2023 funds europe

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