The European ETF market has reached a pivotal moment: The industry conversation has moved beyond whether the rapid expansion of recent years will continue, to the question of how the ecosystem will support what comes next.

As we highlight in our latest 2026 Global ETF Outlook, last year was another landmark for the ETF market in Europe. Marking the 25^th anniversary of the region's first ETF, we saw record assets under management (AUM) alongside historic highs in both investor flows and fund launches. However, this growth is about more than just volume; it represents an acceleration in investor adoption and the expansion of ETF use cases. No longer viewed simply as a "side experiment" by asset managers, ETFs are becoming a core component of distribution and one of the key foundation blocks of European wealth management.
 

The rise of active ETFs

Active ETFs will be the defining product story of 2026. Although they currently represent only 3 percent of total European ETP assets, the momentum is growing. In 2025, active strategies saw record inflows of more than US$38 billion (representing nearly 10 percent of all flows). Asset managers are increasingly embracing the wrapper, with over 36 percent of new funds in 2025 employing an active strategy, outpacing passive equity ETF launches in the region for the first time — symbolising a turning point for an industry long defined by index replication.

Active exposures historically focused on equities, but fixed-income active is also gaining traction, expanding in areas such as corporate credit and emerging market debt. We estimate that fixed income will account for 40 percent of all new active ETF activity in 2026.

The wider ecosystem is also reacting to this trend, with managers traditionally associated with passive outcomes now coming to market with active offerings. Meanwhile, regulators have taken a more supportive policy stance, with the likes of the CBI and Commission de Surveillance du Secteur Financier (CSSF) approving reduced portfolio transparency for the first time.

Together, these trends mean that active fund houses no longer view the ETF as a threat to their traditional business. Instead, active ETFs are being embraced as a scalable and efficient distribution platform.
 

The investor revolution

If active management is the product story, retail adoption is the investor story of 2026. The number of ETF investors in Europe reached 33 million in 2025, representing a 69 percent increase in just three years.

This behavioural shift is particularly evident in key markets like Germany and France. In Germany, for example, ETFs are now identified as the "backbone" of equity saving, with automated savings plans acting as the dominant entry point for younger investors.

The expansion of ETFs should gain a further boost from the EU’s updated Retail Investment Strategy (RIS). The strategy aims to reduce cost of ownership and simplify the client journey – objectives which ETF products are exceptionally well placed to deliver.
 

The architecture of growth

For asset managers thinking about how to enter the ETF market, the traditional choice of whether to build, buy, or rent capability has been transformed. The "build" option now includes the ETF share class, which enables firms to retain their long-term performance history and existing shareholder base, while avoiding the overhead of launching an entirely new fund range.

Much has been written recently about the complexity of operating such structures, from both an issuer and service provider perspective, whilst tax implications and cost contagion have been flagged as areas of concern. Some in the industry (including State Street) have found a way to make it work, with Luxembourg seeing much of the demand.

New white-label models are also emerging that allow issuers to retain full control while delegating the entire operational engine – from portfolio management to capital markets execution – to an expert partner. This makes it easier than ever for a fund sponsor to bring a strategy to the European market, without the capital expenditure of building new infrastructure from scratch.
 

A new era in European finance

We predict that the European ETF market will grow by over 25 percent to reach US$4 trillion in AUM by the end of 2026. The next wave of expansion will be driven by the three trends outlined above: the rise of active, the growing adoption by European retail savers, and new and expanded structural innovations.

In the past 25 years, ETFs have transformed from a disruptive wrapper into what is now a core component of the region’s financial ecosystem. This trajectory represents a major growth opportunity for the industry. The winners will be those who recognise that the ETF is no longer just a product; it is one of the key foundation blocks for a new era of growth in wealth management.

Discover how our European market solutions can help you elevate your strategy, unlock insights, drive growth, and stay ahead.