The Boom of Active ETFs in Europe
31 OCT, 2025
Scope Fund Analysis Team
We expect the dynamic development of active ETFs to continue. The fear among established providers of missing out on this market trend is too great. Moreover, asset managers that have traditionally focused exclusively on active fund management may have a unique opportunity to participate disproportionately in this market trend thanks to the rise of active ETFs.
It increasingly appears that active ETFs have now become an important segment for almost all fund and ETF providers, and the main concern is to launch their own products on the market as soon as possible—a trend reflected in the strong momentum of new launches. To do so, existing research processes and resources are often reused, but in a simplified form, for example, through greater systematization or fewer active and discretionary decisions by managers. Premium products from providers that rely on highly active management and strong discretionary performance by managers are often still not offered as ETFs, presumably to avoid cannibalizing their actively managed funds.
This approach has led to numerous constrained active strategies in recent years, although the market for products highly tied to benchmark indices among major asset managers now appears to be saturated. Due to the low level of differentiation—on one hand, from the limited alpha potential, and on the other, from the high quality of existing providers—it will be difficult for new entrants to penetrate this segment. For example, European pioneers such as JP Morgan and Fidelity are already well positioned, thanks to their combination of relatively long experience, established analysts, and low costs.
In the fixed income space, core categories such as government bonds, aggregate bonds, investment-grade corporate bonds, and high-yield bonds are well covered, as are niches such as CLOs. In equities, there is potential for approaches that deviate from benchmark indices, and in fixed income, for example, for global bond products with euro hedging, since investors often introduce unwanted currency fluctuations into their portfolios through commonly used categories like global sovereign, aggregate, or investment-grade corporate bonds, which are generally considered stable.
Multi-asset products, which have recently fallen out of favor with investors, also offer potential for more active approaches. Currently, the multi-asset segment of active ETFs is still characterized by numerous hybrid strategies that pursue active top-down allocation (e.g., Xtrackers, Vanguard) while using purely passive ETFs. The range of sector-based equity ETFs also remains limited—for instance, consumer goods, gold mining, and financials remain uncovered.
The sharp increase in supply is making it increasingly difficult for new providers to attract inflows. Providers entering the active ETF market for the first time need to differentiate themselves from existing products. In most cases, this means moving away from benchmarks or focusing on niche markets and themes outside of major regions. A track record in management experience or focusing on a popular investment theme or sector can help attract investor attention.
Ultimately, investors should be the winners from these developments. Increased competition pressures providers to deliver attractive returns but also leads to a—perhaps necessary—reduction in management costs. Although there are currently many factors supporting the growth of active ETFs, the segment will not become a long-term success without creating added value for investors.