Soaring European ETF Assets Reach an All-Time High of $2.76 Trillion
In the first half of 2025, Europe's exchange-traded fund (ETF) industry has witnessed a surge in assets under management, driven by strong inflows into equity and fixed-income ETFs. According to data provided by ETFGI, commodities ETFs reported net inflows of $911.67 million in July, contributing to a year-to-date (YTD) total of $7.96 billion.
This record growth can be attributed to several key factors. Europe-domiciled ETFs recorded continued net inflows with $193.1 billion YTD by early August 2025. Equity ETFs rebounded notably in July 2025, with $25.4 billion inflows, primarily driven by core equity exposures in developed markets, the US, and global equities. This surge was fueled by positive Q2 earnings reports and improved investor sentiment due to trade agreements involving the EU and other partners.
Investor rotation and diversification have also played a significant role. Investors have shifted from US-centric equity exposure towards European and other developed markets, responding to trade uncertainties and geopolitical tensions. Emerging market ETFs and European equities have gained appeal as diversification tools to reduce concentration risk.
Preference for passive and active strategies is another key driver. Passive equity ETFs saw substantial inflows (EUR 60 billion in Q2 2025), while active bond funds also attracted significant capital (EUR 50 billion). Additionally, there is growing interest and launches of actively managed ETFs in Europe, which are expected to be an important growth driver in the future despite currently holding a smaller share of assets.
Favorable economic conditions in Europe have also contributed to the growth. Europe’s relative economic growth prospects have improved compared to the US, supported by factors such as increased fiscal spending (e.g., Germany’s landmark fiscal plan), monetary easing, and lower inflation concerns. European small caps are particularly well positioned with expectations of robust earnings growth, attracting investor interest.
The highly competitive ETF market and fee compression have also played a role. Intense competition among ETF promoters in Europe has driven down management fees on core market products, enhancing attractiveness due to lower costs and high-quality index tracking and service. This dynamic has contributed to growth, particularly as large promoters can sustain lower fees to gain market share.
Thematic ETFs represent a niche growth area, although they have seen outflows over the past years. However, certain themes like defense ETFs saw renewed inflows in Q2 2025, marking a tentative revival in this category.
The top 20 ETFs by net new assets collectively gathered $15.19 billion in July. Fixed income ETFs had net inflows of $3.23 billion in July, contributing to a YTD total of $35.92 billion. The iShares Core MSCI World UCITS ETF (IWDA LN) had the largest individual net inflow of $2.06 billion in July.
Active ETFs have also experienced significant growth. The net inflows for Active ETFs in 2025 are more than double the $6.74 billion recorded by the end of July 2024. Active ETFs attracted $3.42 billion in July, with a YTD total of $16.78 billion in net inflows.
Despite the strong growth in 2025, commodities ETFs had net outflows of $4.89 billion year-to-date in 2024. However, they have since turned around in 2025.
In summary, Europe’s ETF asset growth through mid-2025 reflects robust investor inflows into diversified, cost-effective passive and active ETF strategies, underpinned by improving European economic outlook and geopolitically driven regional shifts in equity exposure.
- The surge in assets under management in Europe's exchange-traded fund (ETF) industry was primarily due to strong investor inflows into equity and fixed-income ETFs during the first half of 2025.
- Favorable economic conditions in Europe, including increased fiscal spending, monetary easing, and lower inflation concerns, have contributed to the growth of ETF assets.
- Investor rotation and diversification played a significant role in the record growth of Europe's ETF industry, with investors shifting away from US-centric equity exposure and towards European markets and active ETFs.
