Passive strategies and bond funds dominated the European market in 2024
13 FEB, 2025
The year 2024 ended with a clear picture for the European fund market: according to Morningstar Direct data, passive strategies and bond funds dominated the scene, while active strategies struggled. With net inflows of 459.6 billion euros into long-term funds domiciled in Europe, the market showed a strong propensity for investments in bonds and indexed instruments, confirming the growing shift of investors towards less expensive and more efficient solutions in terms of yield.
Equity vs Fixed income, bond strategies shine
Equity funds recorded net inflows of 182.1 billion euros in 2024, with a particularly positive last quarter, characterized by 89.3 billion euros of new subscriptions, the best result since the second quarter of 2021. However, the first half of the year was sluggish, influenced by macroeconomic uncertainty and interest rates. The most sought-after funds were global and large-cap blend US ones, with inflows of 18.2 billion and 17.4 billion euros respectively in December alone. Sectoral equity funds had fluctuating performance, with ecology among the worst performers with an outflow of 14.3 billion euros.
If equity funds showed mixed signals, bond strategies shone. With net inflows of 336.4 billion euros, the segment recorded its second-best year ever. The lowering of interest rates by the European Central Bank and the Federal Reserve made bonds more attractive, with particularly robust growth in fixed maturity bond funds and European corporate bonds. The US bond funds made a significant contribution to the overall inflows.
Passive vs. active management: the overtaking is served
2024 confirmed the dominance of passive management: indexed funds attracted 307.6 billion euros, marking an organic growth of 10.2%, while active funds stopped at 150.5 billion, with a growth rate of 1.8%.
Furthermore, the market share of passive funds on long-term funds has risen to 29.58%, demonstrating the growing preference of investors for cost-efficient instruments. This phenomenon is reflected in the top-performing managers of the year, with iShares and Vanguard leading the way.
Sustainability: opposing trends
The sustainable funds market has seen divergent trends. Funds classified as Article 8 under the SFDR regulation have collected 148 billion euros, while those Article 9 have suffered outflows of 22.2 billion, highlighting a downsizing of interest in the most rigorous ESG strategies.
From an organic growth perspective, Article 8 funds have recorded an increase of 2.82%, while Article 9 funds have suffered a decrease of 6.8%, marking the fifteenth consecutive month of outflows.
