Active ETFs Are Emerging as Europe’s Next Major Growth Opportunity
The European ETF industry is entering a new phase as established active managers increasingly embrace the ETF wrapper to deliver their investment capabilities to institutional, wealth and retail investors.
In this episode of ETF TV, Deborah Fuhr, producer of ETF TV, and Margareta Hricova were joined by Steve Palmer, Head of ETF Solutions at Royal London Asset Management, to discuss the outlook for active ETFs in Europe and Royal London Asset Management's ambitions in the ETF market.
One of the key messages from our conversation was that an ETF should not be defined by whether the underlying investment strategy is active or passive. The ETF is a wrapper and distribution technology.
For much of the past two decades, European ETFs have been synonymous with index investing. That is changing rapidly.
"The active ETF story is in its infancy."
Steve Palmer, Head of ETF Solutions, Royal London Asset Management
Active ETFs change the basis of competition
For ETFs tracking widely followed benchmarks, competition has traditionally centred on fees, liquidity, tracking and scale.
Active ETFs offer a fundamentally different proposition. Active managers can compete on investment philosophy, portfolio management expertise, performance and track record, while making established strategies available through the ETF wrapper.
For Royal London, this is not about changing how its portfolio managers invest. It is about responding to client demand by delivering existing investment capabilities through a structure that offers greater accessibility and is increasingly compatible with modern distribution.
Changing how investors access investments
Investors value ETFs for their accessibility, transparency, liquidity, intraday pricing and compatibility with digital platforms.
This is particularly relevant as retail and wealth adoption of ETFs increases across Europe.
Germany's ETF savings-plan market is an important example. ETFs have become widely used as vehicles for regular investment, demonstrating their potential not simply as trading instruments but as long-term savings, wealth-building and retirement vehicles.
For active asset managers, this evolution creates an important opportunity to reach investors through the channels and formats they increasingly prefer.
ETFs can also support international distribution. Royal London sees the globally recognised ETF structure as an important way to make its investment capabilities accessible to investors beyond the UK, including across Europe and other international markets.
Transparency matters
We also discussed which ETF characteristics are most valuable to investors.
While intraday trading is frequently highlighted as a defining characteristic, the ability to trade throughout the day does not mean long-term investors need to do so.
Arguably more important is transparency. Investors can see prevailing market prices and know their execution price when buying or selling an ETF. ETFs also fit naturally within digital wealth platforms and investment apps, where investors increasingly expect real-time information and accessibility.
I have long considered ETFs to be a democratic investment product, providing both large institutions and individual investors access to the same investment vehicle.
The next chapter
Europe is increasingly moving beyond the historical distinction between "passive ETFs" and "active mutual funds."
The ETF is becoming a delivery mechanism for both.
For traditional active managers, the strategic question may therefore be shifting from "Should we launch ETFs?" to "Which of our strategies should be available as ETFs, and which new investors and markets can we reach through them?"
That evolution could define the next major chapter of European ETF growth
To watch this and other ETF TV interviews, visit ETFTV.net.
About ETF TV
ETF TV provides insights, interviews and analysis on the global ETF industry, featuring leading voices from across asset management, regulation and capital markets.
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Thank you to Royal London Asset Management for sponsoring this episode. For further information on Royal London Asset Management, visit https://www.rlam.com/
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