Morningstar has published its review of the European open-end (OE) fund and ETF market for Q2 2026.
European OE funds and ETFs, excluding money market funds, gathered €188bn in the second quarter of 2026, down from €203bn in the first quarter, as tensions in the Middle East weighed on investor risk appetite.
“The second quarter shows investors becoming more selective about where they take risk: investors sought defensiveness and inflation protection, but also returned to areas of the equity market linked to AI and technology.”
“Fortune sometimes favours the bold, with some European investors returning decisively to global and US equities where strong corporate earnings and continued enthusiasm around AI drove significant demand for technology-focused stocks, reversing the caution towards US markets earlier in the year.
“But rising tensions in the Middle East broadly stoked oil prices and inflationary concerns, encouraging many investors to rather seek the relative stability of fixed income. Key choices were inflation-linked bond funds or higher-yielding emerging-market bond funds – helping fixed income overtake equity as the quarter’s preferred asset class.”
Jeana Marie Doubell, Analyst at Morningstar
Key findings from the report:
- Fixed income displaced equity as the leading asset class in the second quarter, gathering €84.1 billion versus €75.7 billion in Q1, while equity inflows eased from €98.6 billion to €72.4 billion.
- Allocation funds notched a third straight quarter above €20 billion, while real assets returned to inflows with €3.7 billion, almost fully reversing the combined €4.1 billion of outflows seen over the two preceding quarters.
- The shift towards passive investing persisted, with passive strategies accounting for 75% of net inflows. Passive funds gathered €128.5 billion, led by ETFs with €94.6 billion. Active funds gathered €59.4 billion.
- Equity remains passive’s story, with passive equity funds gaining €89.9 billion while active equity funds shed €17.8 billion. Bonds told a different tale, with active bond funds gathering €47.6 billion compared with €36.6 billion for passive counterparts.
- Investors returned decisively to US and global equity exposure, with US and global large-cap blend equity categories gathering €88.2 billion combined, more than double their first-quarter total, on robust earnings and technology-related enthusiasm.
- Technology funds rebounded sharply, attracting €11.7 billion in Q2 — the best quarter since Q1 2021 — reversing €5.4 billion of first-quarter outflows, and thanks in part to the SpaceX IPO. Infrastructure funds also benefited from data-centre-related interest, gathering €3.8 billion.
- Inflation-linked bond funds posted their strongest back-to-back quarters since the 2021 reflation trade, gathering €1.9 billion in Q1 and €2.5 billion in Q2, taking first-half inflows to €4.4 billion.
- Thematic funds turned mildly positive, taking in €0.9 billion net in Q2 — their first positive quarter since Q1 2023 — driven by a €3.7 billion turnaround in technology funds.
- BlackRock topped the flows league table again in the second quarter with €36.4 billion, mostly directed at its suite of iShares-branded passive funds.
A full copy of the report can be found here.
