After 25 years of impressive growth, Europe's ETF market still has plenty of room to expand.
Policy initiatives designed to encourage greater retail participation in capital markets, including the Savings and Investments Union, could help create a more supportive backdrop for ETF adoption in the years ahead.
The scale of the opportunity is clear. Assets invested in the European ETF industry reached a record $3.22tn at the end of 2025, up from $2.27tn a year earlier, according to ETFGI research. Yet Europe remains significantly smaller than the US ETF industry, which stood at $13.43tn at the end of 2025.
That difference matters. According to the Council of the European Union, only 17% of EU household financial assets are invested in capital market instruments, such as shares, bonds and investment funds, compared with approximately 43% in the US.
For ETF providers, this creates a clear opportunity to help more investors participate in capital markets through transparent, liquid and cost-effective investment vehicles.
In this context, ETFs are the product of choice for many European investors because they combine transparency, liquidity and value for money with access to a broad range of investment opportunities," says State Street's Ann Prendergast, Head of State Street Investment Management, EMEA.
New generation, new expectations
Many of the forces that supported ETF adoption over the past 25 years, including transparency, liquidity, lower costs and accessibility, are now established features of the investment landscape.
The question now is how the market's next phase of development will unfold, particularly as a new generation of investors enters the investment landscape.
Technology will be central to that next phase, says Matteo Andreetto, Global Head of NextGen Business Development and Digital Wealth at State Street. As digital tools become increasingly important for constructing, monitoring and rebalancing portfolios, providers are focusing not only on the products they offer, but also on the usability of their platforms, data and digital experience.
According to Andreetto, the future of asset management is likely to be shaped by several developments, including:
• digitalisation across the investment journey;
• tokenisation and the evolution of market infrastructure;
• broader availability of private assets through ETF structures;
• more seamless digital distribution for a new generation of investors.
The next generation of investors is different in the way they access their wealth, digitally, 24-7, and the way they also want to invest in very transparent, efficient and tradable investment vehicles. What we are building for next-gen clients is an asset management of the future: ETFs on one side and the digital distribution on the other," he says.
Historically, ETF providers competed largely on product range and price. As ETFs become more established, competition is increasingly shifting towards the broader infrastructure around those products. Advisers are placing greater value on portfolio construction tools, model portfolio support, implementation guidance and client-facing resources that help them explain investment decisions clearly.
Twenty-five years ago, the central challenge was access. Today, the democratisation of investing has opened markets to a much wider audience, but it has also brought greater choice and higher expectations. With thousands of ETFs now available globally, investors and advisers need clearer ways to compare options, understand exposures and build portfolios with confidence.
Transparency has also raised the bar. Investors increasingly expect timely market insights, educational content and clear explanations of portfolio positioning. As a result, providers are judged not only on performance and cost, but also on the quality of information, tools and support they provide.
The next opportunity for ETFs
The opportunity is not limited to equity exposure. While equities remain the largest part of the market, ETFs are increasingly being used to access fixed income markets, implement active strategies and build diversified multi-asset portfolios. They are also expanding into more specialised areas that were once considered difficult to access through an ETF wrapper.
State Street's recent launches show how far the ETF market has evolved. The firm introduced its first active ETF in 2024 and its first broad commodity ETF for European investors this spring. Its collaboration with Blackstone on an actively managed CLO ETF brings together several of the trends defining the next generation of ETFs: active management, specialist fixed income exposures and strategic partnerships.
"We see the demands of our clients now going much broader, across different asset classes. Clients are really looking for innovation," says Marie-Anne Heeren, Head of Client Coverage Europe at State Street Investment Management.
If the first 25 years of ETFs in Europe were about access, the next phase may be defined by flexibility, diversification and the quality of support providers offer to a new generation of investors.
Today is not about the education about ETFs; it is about how to use ETFs. That is the conversation we are having with the next generation, which is way savvier about the tools that they have at their disposal and how to build their portfolios," says Antoine Lesné, Head of ETF Specialists, EMEA, at State Street Investment Management.
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