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The European ETF Market: Growth, Trends, and Impact on Underlying Instruments

The Journal of Portfolio Management Non-US Financial Markets 2021, 47 (7) 95-111

This article presents some key figures about the European market for ...

Author(s) :

Véronique Le Sourd, Shahyar Safaee

Summary :

The Journal of Portfolio Management Non-US Financial Markets 2021, 47 (7) 95-111

This article presents some key figures about the European market for exchange-traded funds (ETFs), with a focus on growth, key trends, and impact on underlying instruments. One particular important area of growth is the environmental, social, and governance (ESG) ETF segment, with the market size in Europe exceeding that in the United States both in terms of assets under management (AUM) and number of products, although the gap has tended to decrease slightly over time. Turning to ETF ownership, the authors find several reasons to expect the impact of ETFs on European equity markets to be more modest than that documented in the academic literature for the US equity markets, namely a materially lower level of average ETF ownership and a primarily international ownership (i.e., located in the United States). These figures are put in perspective with the results of a survey carried out during the first quarter of 2021, which provides insights into European professional investor perceptions of ETFs. The survey also reveals a particularly strong appetite for ESG-themed funds, and ETFs appear to be a useful instrument for integrating an ESG component into investment decisions.

 

KEY FINDINGS

  • ETF ownership of European stocks is about half that of US stocks; the European ESG ETF market size exceeds that in the United States, both in terms of AUM and the number of products, but incremental AUM are now almost on par.
  • European investors show great interest in SRI/ESG investment, with 55% of ETF users already investing in SRI/ESG in 2021 and 68% of those who have not yet done so considering integrating ESG into their portfolios in the near future.
  • ETFs appear to be a useful instrument for integrating an SRI/ESG component into investment, with 67% of respondents using them to do so and 60% wishing to see further developments in SRI/ESG-based ETFs and/or low-carbon ETF

 

TOPICS

ESG investing, exchange-traded funds and applications, developed markets, performance measurement

 

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Type : Academic Publication
Date : 01/06/2021
Editor : Portfolio Management Research