European asset managers are increasingly offering active exchange-traded funds as they look to remain relevant.
This is despite the fact that European investors do not enjoy the tax benefits afforded to their American counterparts, who are able to skip the capital gains tax on assets sold by ETFs that they must pay with mutual funds.
Amundi was the latest to expand its active ETF offering, announcing the launch of the Amundi EUR Cash Active UCITS ETF, its new active money market ETF, last Tuesday. The firm is far from alone, with Janus Henderson research projecting that the European active ETF market will reach $1 trillion by 2030. Just in 2025, there have already been $25 billion of flows into active ETFs, according to BNP Paribas Asset Management’s head of ETF research Daniel Dornel.
“It’s still small compared to the U.S. but it’s increasing, and year after year we are increasing the pace of net new cash on active ETFs in Europe,” said Dornel, who added that 40 percent of new ETF launches in Europe are active strategies.
“We don’t have the same tax advantage for ETFs in Europe, but there are still performance benefits to doing an ETF over a standard mutual fund,” he said. “The ETF wrapper is trendy and people like it because of liquidity, transparency, and intraday trading.” If you launched the same strategy in an ETF and mutual fund, it would get more attention in the ETF wrapper, he argued.
According to Dornel, the active ETFs most favored by investors in Europe are broadly diversified and remain close to index with a small twist for alpha generation.
Other managers agreed that the main reason to issue active ETFs for European investors is the need to stay relevant. “Clients are clearly showing interest, and you can’t ignore the growth numbers,” said Avni Thakrar-Neeliah, product strategy director at Schroders in London. “It is all about choice and offering a way to access the investment.”
For Schroders, it is about giving their clients access to a level of transparency into their investments that is absent with mutual funds. The speed of taking a position in an ETF is also faster than a mutual fund, so for some investors the ability to get in and out of an investment quickly is the key draw.
If the tax benefits were the only advantage to active ETFs, Thakrar-Neeliah added, then Europe wouldn’t have seen such rapid growth.
Thakrar-Neeliah said that over the long term, the ETF wrapper lends itself better to a digital future and emerging technological changes than a mutual fund does.
“It’s about bringing that flexibility to clients today, but then also setting up the business in a way that, as technology emerges, actually plugs in in a far simpler way,” she said. “You are seeing a huge growth in digital assets in Europe in particular, and so it is important to serve the client base that uses it.”
