• Carne Group says growth of the active ETF market will also be fuelled by more launches from  major fund management firms due to updated regulation and investor demand
• Research⁽¹⁾ with more than 200 professional investors released by Carne Group reveals more than four out of five institutional investors and wealth managers expect to have 5% or more of investment assets in ETFs within three years
• Almost all say ETFs are increasingly used as core holdings rather than for short-term allocation

Carne Group, a leader in fund structuring, regulation and governance solutions for the asset management industry, believes the European active ETF sector will see accelerated growth due to improved market efficiency – driven by an evolving regulatory environment, investor demand and  more product launches and managers entering the sector.  

Patrick O’Brien, Managing Director, Business Development at Carne Group said: “Active ETFs will increasingly become an option for managers to increase investor choice and product range and the changing regulatory environment is enabling them to enter the ETF sector, which is  dominated by passive funds.”

Carne Group says growth in the active ETF market will be supported by an increasing number of leading asset managers including Robeco, iShares, Eurizon Capital, ARK Invest and others launching active ETFs in Europe or planning to do so.⁽²⁾  and potentially a more favourable regulatory environment. 

The UCITS eligible assets directive, issued by the European Securities and Markets Authority (ESMA) on 7^th May 2024 could broaden the active ETF sector. 

Globally, actively managed strategies are playing a bigger role in the ETF market. During the first half of 2024, they attracted 25% of flows and achieved 20% organic growth rate, with assets growing to a record $889 billion, up from $714 billion at the start of the year.⁽³⁾

In 2022, active ETFs in Europe made up 3% of ETFs flows versus 1.5% of AUM.  In 2023, the corresponding figures are  5% and 1.8%. ⁽⁴⁾

Researchfrom Carne Group shows institutional investors plan to  boost allocations to ETFs as the sector is increasingly regarded as part of their core holdings.  The study⁽¹⁾ with wealth managers and institutional investors including pension funds, insurers and family offices who collectively have $1.7 trillion in assets under management, found more than four out of five (84%) expect to have 5% or more of investment assets in ETFs within three years. Around a third (32%) expect to have more than 7%.

That would represent dramatic growth – currently around two-thirds (67%) of the investors questioned estimate they have less than 5% of investment assets in ETFs. The predicted growth reflects the switch in institutional views of ETFs – almost all (97%) questioned say ETFs are used as core holdings rather than for short-term allocation.

In a similar Carne study of institutional investors⁽⁵⁾, around half (48%) questioned expect the global ETF sector to be worth $14 trillion or more within four years compared with $10.212 trillion in June last year.⁽⁶⁾ 

Its research shows institutional investors say the key attraction of ETFs is that they provide access to hard to access asset classes followed by their ability to make it easier to gain concentrated access to specific asset classes. The high degree of innovation they offer as well as their lower charges compared with other structures are also seen as important benefits.

Patrick O’Brien added: “Institutional investors are looking to increase allocations to ETFs over the next three years as our research shows, with ETFs firmly established as a core holding rather than a short-term allocation tool. More active ETFs will lead to more choice. This will further increase investors’ holdings in ETFs as part of their core investments and that trend will be supported by more managers entering the space and opening up new distribution channels.”    

END

About the research 

⁽¹⁾ Carne Group commissioned the market research company Pureprofile to interview 201 investors 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, Norway, Finland and Denmark with a total of $1.7 trillion assets under management. 

The survey was conducted in December 2023 and January 2024.

⁽²⁾ Active ETFs in Europe: Small, Shy and on the Rise  (Morningstar, April 2024)

⁽³⁾ Global ETF Flows First Half of 2024 (Morningstar, June 2024)

⁽⁴⁾ State Street: New paths to Growth, Global ETF Outlook 2024 

⁽⁵⁾ Carne Group commissioned the market research company Pureprofile to interview 50 senior executives working for equity and fixed income fund managers in the UK, US, Germany, Switzerland, Italy, France, the Netherlands, Norway, Finland and Denmark.

Those interviewed included COOs, CFOs CROs, Heads of Product, Heads of Compliance, Head of Legal and senior fund managers.

The survey was conducted in December 2023 and January 2024.

⁽⁶⁾ LSEG Lipper( August 2023)

About Carne Group

Founded in 2004, Carne Group is an international company that has established itself as an expert and pioneer in fund regulation and governance solutions, allowing it to become Europe’s leading third-party management company and trusted partner to the fund management industry

Carne works with more than 650 clients – from boutique fund managers to global institutional investors –  supporting funds distributed in over 160 countries and overseeing more than $2 trillion assets under management. Carne employs more than 600 employees worldwide. https://www.carnegroup.com/

This publication has been prepared for general guidance on matters of interest only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice.