New investors accelerate growth in ETF market

New data from YouGov commissioned by BlackRock shows a wave of exchange-traded fund (ETF) adoption from the next generation of European investors. The research, which explores the age, investment experience, and market location of potential ETF investors across 14 European countries, offers new insight into current and future European ETF ownership.

Respondents were asked to signal what if any investment vehicles they invest in today, and what they intend to use to invest in the next 12 months. Three key trends are clear: ETF markets across Europe have the momentum to grow at pace; ETFs are increasingly being used by people as a starting point when investing; ETF investors are getting younger.

“Assets on European digital investment platforms have grown at 20% per annum since 2019 to almost $2 trillion as of the end of 2022.  ETFs have helped to fuel this growth and we continue to see a strong acceleration in ETF adoption by younger investors, aged 18-34 and expect that over the course of 2023, this group will account for 54% of new ETF investors. 41% of these are expected to be first-time investors who have learned about investments through these platforms and value the simplicity and low cost of ETFs.”

Jane Sloan, EMEA Head of iShares & Index Investments.

“Spain and Portugal emerge as the markets with the greatest growth potential for ETFs in Europe with a significant 64% relative growth, signaling a paradigm shift in investment trends. With 1.1 million of the population likely to invest in ETFs in the next 12 months, the Iberian market presents a substantial growth opportunity for ETF providers and investors alike".

Javier García Díaz, Head of Sales for BlackRock in Iberia

1. Key growth markets

In terms of market size, Germany already represents the largest number of ETF investors in Europe, due to the evolution of digital distribution platforms and the increasing popularity of ETF savings plans. There is still room for growth. Just over two million Germans, who today don’t currently invest in ETFs, indicated that they are very likely to invest using an ETF in the next 12 months, representing a potential relative growth of 22% in the German ETF market.

Countries with low ETF market penetration represent the greatest growth potential. In Spain and Portugal, just over a million people are very likely to invest using an ETF in the next 12 months, representing a relative growth of 64% in the combined Spanish and Portuguese ETF markets. France, Belgium, and the Netherlands show high a high combined growth rate of 42%, and the UK growth rate is anticipated to be 56%.

The number of Italian ETF investors is projected to grow by over 800,000 new ETF investors, representing a 39% growth in the Italian ETF investment market.

2. ETFs as an entry to investing

ETFs provide an easy and cost-effective way for investors to begin investing. With low associated fees and minimum investment contributions, investors can include a broad range of exposures into their investment portfolios, made even more accessible through an evolving selection of digital platforms.

The data indicate that the accessibility of ETFs makes them especially attractive to first-time investors. On average across Europe, of the next wave of ETF investors, 41% will have never invested before. Of the two million upcoming German ETF investors, just under half (43%) do not hold any investments and indicated that they are “very likely” to start investing using ETFs.

3. ETF investors getting younger

Generation Z and Millennials are emerging as driving forces for growth in the European ETF market, whereas currently, ETFs are largely owned by the 35-54 age group. Investors aged 35+ represent 63% of current ETF owners, according to YouGov. BlackRock believes that this younger cohort, now participating in using ETFs, could be a result of them being more comfortable with self-directed decision-making and the emergence of online investment platforms. In Europe, the digital market now stands at almost USD 2 trillion in assets.

Across Europe, of the next wave of ETF investors, 54% will be aged between 18 and 34 years, compared to only 32% of new investors aged 35-54. This represents a reversal in ownership as those aged 35+ will represent only 46% of ETF owners. In Germany, the potential two million new ETF investors will represent a 34% increase in the number of 18–34-year-olds investing using ETFs.

There is no guarantee that any forecasts made will come to pass.