Who will hold ETFs: Europe’s market shifts over five years

Europe’s exchange-traded fund market is set to grow over the next five years as retail investors, pension systems and distribution channels change how ETFs are held and used across the continent.

Fintech companies and major banks are rolling out digital savings plans that make it easier for retail clients to invest regularly in ETF portfolios. At the same time, some countries are changing pension rules that steer retirement savings toward equity investments, including ETFs. Fee-based advisory models and rising institutional allocations are also increasing ETF use among advisors and large investors.

Adrià Beso, Head of Distribution at WisdomTree Europe, said Europe is developing along its own trajectory shaped by investor needs, regulation and distribution. He added, “The biggest change over the next five years will be who is using ETFs, rather than simply which products are available.”

Andrew Keegan, Head of Product for International at State Street Investment Management, described the market as operating on “its own timeline, influenced by the United States but not defined by it.” He identified digital savings plans, fee-based advisory models, retirement reform and growing institutional ETF allocations as the structural factors supporting growth.

Matt Tagliani, Head of EMEA ETF Product at Invesco, noted that many European investments are made by fiduciaries managing other people’s money, which keeps advisers and wealth managers central to portfolio construction and distribution.

Product development is expected to continue alongside wider distribution. Executives pointed to ongoing issuance in active and thematic ETFs, income-focused strategies and US-style structures such as buffered and defined-outcome ETFs. They also cited continued work on sustainable investing products, digital asset investment vehicles, cross-border fund distribution techniques, optimisation methods and synthetic replication.

Regulation and fund domiciles remain relevant. The UCITS structure continues to serve as the main wrapper for cross-border ETFs, with Ireland and Luxembourg the primary domiciles for many international funds. Market participants say regulatory clarity in these jurisdictions supports cross-border ETF distribution.

Executives and market participants report that over the next five years the ETF market in Europe will broaden in both investor base and product range, with national markets progressing at different rates and retail, pension and institutional channels driving where ETF holdings grow.