Are Active/Semi-Active ETFs Keeping Up With Growth Expectations Of Market Participants?

There is currently a lot of noise around active ETFs in Europe. But is the trend toward active or semi-active ETFs really so strong or are all the headlines on this topic are just chasing attention? Generally speaking, the trend toward active/semi-active ETFs is visible as an increasing number of managers of actively managed mutual funds speak about possible launches of respective ETFs, while only a small number of these managers have launched an active/semi-active ETF so far.But how big is the market for active/semi-active at the moment? Is it really worthwhile that this market segment gets so much attention from all kinds of market participants? To learn more about the growth in the segment of active/semi-active ETFs we have analyzed the period between January 31, 2022, and September 30, 2024. Within this analysis, ETFs are considered as active ETFs when they don’t follow a benchmark or want to beat a benchmark with active allocation decisions which may consider also securities which are not constituents of the benchmark. ETFs are considered as semi-active when they want to beat their benchmark but take the weightings of the benchmark into consideration when making investment decisions.The assets under management (AUM) in European ETFs grew from €1,213.5 bn to €1,917.2 bn between January 31, 2022, and September 30, 2024. Splitting the AUM up by management type shows that passive ETFs held, as to be expected, on both dates by far the majority of the AUM—€1,213.5 bn and €1,771.3, respectively.  They were followed by semi-active ETFs which saw their AUM increasing from €90.1bn to €131.1 bn over the observation period, and active ETFs who witnessed their AUM growing from €13.5 bn to €14.8 bn, respectively.Chart 1: Assets Under Management in the European ETF Industry by Management ApproachSource: LSEG LipperDespite the growth in assets under management, the market share of semi-active ETFs was in spite of some fluctuation in between the same (6.84%) at the beginning and the end of the observation period. That said, the market share of passive ETFs grew slightly from 92.14% to 92.39%. Conversely, the market share of active ETFs declined from 1.02% to 0.77%.In other words, the growth rate of active ETFs over the observed time period was only 10.29% while semi-active ETFs grew by 45.51% and passive ETFs by 45.97%. This means that semi-active ETFs were growing in line with the rest of the European ETF industry, while active ETFs had a lower growth rate compared to the overall ETF industry.Chart 2: Market Share of Assets Under Management in the European ETF Industry by Management ApproachSource: LSEG LipperBy looking at these numbers, one needs to bear in mind that the growth was not only driven by net inflows. The main driver for the growth in the European ETF industry over the course of the last 32 months was the performance of the underlying markets. That said, a closer view on the estimated net flows shows that investors are interested in active/semi-active ETFs.Don’t get me wrong—even as I think that there is currently too much noise around active/semi-active ETFs in Europe given their market share of the assets under management, I strongly believe that active/semi-active ETF will become one of the main drivers of growth in the European ETF industry rather sooner than later. This is because I expect that most of the active managers who are currently speaking about the launch of active/semi-active ETFs will launch respective products soon and this growth will pave the way for U.S. managers to enter the European ETF market with the launch of active and/or semi-active ETFs.More By This Author:S&P 500 Earnings Dashboard 24Q3 – Thursday, Nov. 7Russell 2000 Earnings Dashboard 24Q3 – Thursday, Nov. 7S&P 500 Earnings Dashboard 24Q3 – Wednesday, Nov. 6