Active ETF fees in Europe have shrunk by over a third in the last decade, reflecting investors' appetite for lower fee structures.
The average cost has fallen from 0.41% in March 2013 to 0.28% by March, according to data from Morningstar, highlighting a trend toward lower fees and greater cost efficiency.
Assets in active UCITS ETFs have increased five-fold since the start of 2015, from $6.1bn to $32.9bn by the end of 2023, according to data from ETFbook.
This year, flows into active ETFs nearly doubled to €2.1bn in Q1, up from €1.1bn in the previous quarter. Despite the growth, the European active ETF market only account for 1.9% of total European ETF assets.
“Investors typically associate ETFs with low fees – and that view is hard to shake,” Monika Calay, director, manager research at Morningstar, said.
“This means active managers are nudged to offer competitively priced products, which typically implies more-constrained strategies with lower potential for excess returns relative to a traditional passive, market-cap approach.”
Initially, the growth of the active ETF market was tied to a high uptake of bond strategies during low interest rate periods.
However, over the past two years, active equity ETFs have overtaken fixed income strategies, aggregating €20bn assets under management (AUM).
“The European active ETF market is expected to experience accelerating growth as an increasing number of prominent asset managers enter the field,” Calay added.
The latest headline launch in the active equity space came from ARK Invest Europe, unveiling three actively managed ETFs covering innovation, genomics and artificial intelligence (AI) in April.
BlackRock also unveiled two equity-income active ETFs in March.
Elsewhere, Eurizon Capital and Robeco are both set to enter the European market this year, with the former awaiting regulatory approval for its active ETF launch.
