As the European ETF industry celebrates its 25th anniversary, new research covering institutional investors and wealth managers across Europe [1] commissioned by Carne Group, a leader in fund structuring, regulation and governance solutions for the asset management industry, reveals 82% agree that ETFs are shifting from short-term asset allocation strategies to core portfolio holdings.
Respondents say active ETFs are expected to increase market share dramatically over the next three years. Almost two-thirds of investors say that active ETF assets will grow from around 2% market share of total ETF assets in Europe today to between 6% and 9% before the end of the decade.
The research also reveals investors are using active ETFs to access new asset classes.
One-quarter of respondents say they invested in crypto for the first time following innovation in the ETF market, while more than half (56%) say they increased their allocation to the asset class. More than one in ten (13%) of investors say they are likely to increase allocations to esoteric asset classes via the ETF market.
However, the study shows some concern from investors that some ETFs are not living up to their active labels. For example, the rise of ‘shy active’ ETFs that follow a benchmark-aware approach, meaning they deviate less from the benchmark index than traditional active mutual funds, offering lower active share and tracking error.
Nearly nine out of ten (88%) of the investors surveyed say that managers operating such shy active funds are misleading the market.
Patrick O’Brien, Managing Director, Business Development at Carne Group said: “Active ETFs will provide the momentum for the next stage of the ETF growth story to take flight. Unlocking the opportunity in this highly competitive space requires careful consideration and speed of execution which is why we are seeing managers increasingly partner with third parties.
“At Carne, we work with managers who want to establish their own ETF fund, as well as providing the management company underpinning many leading European ETF white label platforms.”
Patrick added: “We share concerns about the risk of ‘shy active’ ETFs which can be problematic for investors because they often operate under the guise of active management while closely hugging a benchmark index. Fund managers need to be sure they are transparent about the strategies they offer.”
About the research
[1] – Carne Group commissioned the market research company Pureprofile to interview 200 institutional investors and wealth mangers working for pension funds, family offices, wealth managers, insurance asset managers, and consultants to institutional investors and asset managers in the UK, Germany, Switzerland, Italy, France, the Netherlands, Sweden, Denmark, Norway and Finland with a total of $2.33 trillion assets under management. The research was conducted in December 2024 and January 2025.
