ETF surge sparks alarm and opportunity among European Fund Managers

London, 29 February 2024 – In a rapidly evolving investment landscape, European mutual fund managers are increasingly voicing their concerns and recognising opportunities presented by the surge in Exchange-Traded Funds (ETFs). According to recent data by consultancy BLACKWATER, 62% of European mutual fund managers are now expressing apprehension regarding the growth of ETFs, a significant increase from 18% reported in 2021.

Furthermore, the latest survey from BLACKWATER reveals a noteworthy shift in perspectives, with 46% of European mutual fund managers acknowledging a compelling business case for incorporating ETF offerings, a substantial rise from 27% in the previous year. This paradigm shift underscores a growing recognition of the potential benefits ETFs can bring to traditional mutual fund businesses.

When probing the challenges associated with venturing into the ETF space, the cost of establishing an ETF business emerges as the primary concern for European mutual fund managers. A staggering 54% of respondents cited this as their chief apprehension, highlighting the financial hurdles inherent in adapting to this evolving market segment.

Despite these challenges, the data suggests a palpable momentum towards ETF integration among European mutual fund managers. A striking 92% of respondents indicate plans to either launch ETFs or intensify due diligence within the next two years, a remarkable surge from a mere 9% in 2021. Moreover, 39% of surveyed managers perceive the inclusion of some form of ETF offering as inevitable for all asset managers striving to maintain competitiveness in the market.

Recognising the evolving landscape, 77% of European mutual fund managers view the development of actively managed ETFs as a distinct opportunity. This sentiment underscores a growing willingness to explore innovative approaches within the ETF domain, positioning managers to adapt and thrive amidst industry transformations.

The findings of this survey by BLACKWATER underscore the dynamic nature of the investment landscape and the imperative for mutual fund managers to adapt to emerging trends.

The survey was conducted with 127 managers from various locations across Europe, encompassing a diverse range of large and small firms. Participants included CEOs, Heads of Distribution, Heads of Strategy, Heads of Product, and other key roles.

As the ETF market continues to expand and evolve, European mutual fund managers are confronted with both challenges and opportunities, necessitating strategic foresight and proactive engagement to navigate the shifting terrain successfully.