The ETF market has entered a new phase of evolution. Investors are looking for offerings that provide greater diversification, grant access to unique products, achieve a specific outcome or target outperformance. This shift is driving an influx of new fund sponsor types and the broadening of product capabilities from incumbents. At the same time, issuers are recognizing the increasing importance of creating ETF strategies to complement their existing product suites. So what does all this mean for industry participants?

In our 2025 Global ETF Outlook and our midyear review, we highlighted the year’s top trends for Europe. These have included record growth of the overall market, the acceleration of actively managed ETFs, the move toward unlisted/listed share classes and the increased adoption by retail investors. This article explores these trends in more detail and explains their implications for industry participants in the region.
 

The next wave of expansion and innovation

In Europe, there remains a huge appetite for ETFs and an increasingly diverse range of products coming to market. With assets under management (AUM) of US$3 trillion¹ in ETFs in the region to date, the exponential asset growth in recent years is expected to endure, with one industry survey estimating that this AUM could double in fewer than five years.²

Global growth in active ETFs has also been striking. To date, Europe has lagged behind the United States on this trend. However, our 2025 Outlook report reveals that the shift to active ETFs is gathering pace in the region, with momentum illustrated by some noteworthy statistics:³

• In 2024, Europe witnessed a substantial increase in annual inflows into active ETFs, rising from US$7 billion to US$20 billion.
• The number of active ETF products available increased significantly, from 103 to 178, accounting for 25 percent of all new products in the region.
• Inflows into active ETFs represented 74 percent of the total AUM in active ETFs at the beginning of that year.

These figures represent an impressive expansion in active ETFs, albeit from a low base, with active strategies topping the charts in 2025 in terms of new fund launches by asset class,⁴ and AUM increasing year-to-date (YTD) by more than 60 percent⁵ relative to 2024 year-end figures. Around 70 percent of that growth is coming from net-new investor flows, with flows 50 percent higher YTD compared to full-year 2024 data.

We also found that ETF asset managers who were traditionally passive are now looking to enter the active space. While passive management remains the bedrock of the European ETF market and a crucial component of its success, it’s clear that active ETFs will play a bigger role in the region going forward. So far this year, 90 percent of new entrants have come to market with active strategies, far exceeding our expectations for the year.⁶

Europe is also witnessing growing interest in other novel products in the ETF space, following trends set in the US. There is nascent demand for Collateralized Loan Obligations (CLO) ETFs, options-based ETFs, active money market ETFs and leveraged products. These offerings stretch the boundaries of investments that can be held within an ETF.
 

Product structure evolution

New and existing issuers are increasingly interested in a commingled fund arrangement containing a mix of listed and unlisted share classes, which unlike recent changes in the US landscape has long been permitted in Europe.

For existing European ETF issuers, it creates the opportunity to expand product distribution and/or consolidate product offerings.

For new entrants, a key consideration is how to leverage their existing track record and shareholder base. The option to add ETF share classes to their already established funds allows the new ETF share class to inherit the previous performance history, while greatly simplifying the launch process compared to setting up an entirely new ETF.

Service providers with unified platforms capable of servicing both mutual fund classes and ETF classes within the same fund are well-positioned to meet this need.
 

The rise of retail

ETFs have been the fastest growing investment product in Europe among retail investors since 2022, and there’s no reason to expect that to change. Today, about one-third of all adults in Europe (roughly 113 million people) are investors. That number is growing, led by interest from 25- to 44-year-olds.⁷ The greater use of digital marketing by firms, inclusion of ETFs on major brokerage platforms, increased financial literacy and attractiveness (ease of trading, fees etc.) of the vehicle are helping to drive this increased adoption.

Retail growth has been particularly strong in France, supported by regulatory changes and tax-advantaged savings schemes. Germany shifted from commission-based to fee-based models for retail investors, enhancing the cost-effectiveness of ETFs. In the Netherlands, growth in the ETF market is being further accelerated by the availability of popular digital investment platforms, with four out of five Dutch ETF investors accessing their ETF products this way.⁸

Overall, retail ownership of ETFs in the region increased from US$60 billion in 2020 to US$270 billion last year and is expected to grow to US$700 billion over the next four years.⁹ Issuers are paying attention, building out retail marketing strategies. In particular, European ETF savings plans offered by platforms and banks have taken off (with 40 percent growth in 2024) and are forecasted to rise from 10.1 million plans in 2024 to 32 million plans by 2028.¹⁰
 

A balanced approach to regulation supports growth and innovation

As the ETF market matures and product innovation accelerates, smart and timely regulation becomes an increasingly critical factor. For both Ireland and Luxembourg, which have become the top two European ETF domiciles of choice, it’s about continuing to shape a regulatory environment that fosters advancements while safeguarding investor interests.

In that regard, the Central Bank of Ireland and the Commission de Surveillance du Secteur Financier are both taking pragmatic stances and constructively engaging with the industry on areas of product innovation — amending or introducing new rules to remove barriers to entry for new issuers and investors alike in areas such as portfolio transparency, new ETF offerings, and in the case of Ireland, fund-naming conventions. These partnerships have been instrumental in driving positive change and helping to create a robust ecosystem. It's vital that public and private sectors continue to nurture such collaboration to ensure Ireland and Luxembourg remain at the forefront of ETF product evolution from a policy, technology and operations perspective.

For other markets, it’s clear that regulations are underpinning the growth of retail investor interest in ETFs. This is certainly true in major markets such as France, Germany and the Netherlands.¹¹
 

Implications for ETF issuers: Adapt and scale

How can offshore funds take advantage of these new growth opportunities in Europe? A key success factor will be for ETF issuers to access a future-ready operating model that offers maximum scalability, transparency and efficiency.

As product complexity grows or as fund providers expand internationally, jurisdictional differences make it imperative for an ETF issuer to have a platform that can support a truly global operation. They will want to work with servicing partners that leverage global technology and can commit to an ETF technology roadmap that anticipates market growth. At State Street, we achieve this by leveraging an integrated, future-ready platform that provides consistency and operational efficiency across ETFs and non-ETFs covering all major markets.
 

Implications for new market entrants

New entrants to the European ETF market, particularly active managers, may face challenges utilizing existing technology and sourcing internal operational expertise to stand up an ETF business and thus seek out asset management tools tailored to ETFs, and/or delegate daily ETF operations management to a third party.

The industry has made significant progress, with both new platforms and existing service providers developing solutions that provide additional cost-effective and time-efficient market entry options for new ETF issuers. These solutions increasingly offer flexible service sets designed to meet issuers’ most critical needs.

In our own business, for example, State Street is meeting that demand by offering a front-to-back ETF platform that integrates the ETF workflow for asset managers, while also addressing the functional challenge via a service offering that allows ETF issuers to launch independently and retain their brand while delegating daily ETF management operations.
 

Putting it all together

The European ETF market is poised for a new wave of growth and innovation: The momentum behind active management is building, product innovation is accelerating and regulations are supporting retail adoption of ETFs. Industry participants who develop the right strategies, operating models and partnerships can set themselves up to thrive.