Europe's active ETFs – why this market is gaining momentum

Active ETFs are one of the most exciting developments in Europe’s capital markets — and an increasing number of investors are discovering their advantages. For the first time, more active than passive ETFs have been launched.

The reason: demand is growing rapidly. Since 2019, assets under management in active ETFs have increased nearly sevenfold — as has the number of funds and providers. Today, investors want more than simple index replication; they seek a broader spectrum of opportunities, including flexibility, risk management, and new strategic approaches.

1. A market on the rise – why active ETFs are growing so strongly

Unlike passive ETFs, active ETFs are actively managed by investment specialists. The goal is to achieve specific investment results, for example:

• outperforming the benchmark index

• generating regular income

• tracking a specific investment theme or investment objective.

At the same time, they offer the typical advantages of an ETF product:

• daily trading on the stock exchange at transparent prices

• clear insights into the composition

• generally lower costs than actively managed funds

This combination makes active ETFs an efficient tool for diversifying portfolios, managing risk, and gaining market access—especially in more volatile market phases.

Growth in numbers

In the past five years, the market for active ETFs in Europe has significantly accelerated:

• Assets under management increased from approximately EUR 10 billion in 2019 to EUR 68.8 billion.

• In 2025, 54% of all new launches were active ETFs—more active than passive for the first time.

• 22% of European ETF investors plan to significantly increase their engagement (by 25% or more).

• An additional 60% plan a moderate expansion (by 10% to 24%).

• The number of asset managers offering active ETFs in Europe is now at 93.

Why is this happening now?

Investors seek the best of both worlds:

• professionally managed strategies and

• the flexibility and transparency of an ETF

This sets the stage for continued dynamic growth of active ETFs in Europe.

2. How investors are using active ETFs today – and where the market is heading

Historically, active ETFs in Europe were primarily used as a long-term core investment. But the picture is changing: investors are increasingly starting to use active ETFs for risk management, hedging, and arbitrage strategies—applications that are already widespread in the US.

Additionally, active ETFs are specifically designed to achieve better returns than the market index (benchmark) in the core investments of a portfolio (core allocations) – while maintaining a low tracking error. Whereas passive ETFs strive to replicate the index as closely as possible, an active ETF aims to beat the market.

So far: Focus on long-term

• Core components of buy-and-hold portfolios

• Focus on global equity strategies

• Deployment in large, liquid markets (e.g., large-cap blend strategy)

Usage differences between Europe and the US

Europe: The highest inflows in 2025 are in global equity and large-cap blend strategies. Many investors continue to use active ETFs as core allocations – with the aim of outperforming the benchmark with low tracking error.

USA: The strongest demand is in derivative income funds (regular income over options) and ultra-short maturities (significantly less interest sensitive).

As the European market evolves, investors will gradually adopt applications and innovations that are already established in the US.

Going forward: significantly broader areas of use

• solution-oriented ETF products like buffer funds – actively managed, options-based strategies targeting a predefined outcome over a set period.

• Access to hard-to-reach or emerging market segments, such as ultra-short maturities

• new asset classes that are barely represented in Europe yet, such as CLOs (Collateralized Loan Obligations)

—> The trend is clear: The European market is becoming more diverse, professional, and innovative.

3. What makes the European ETF market special

ETF trading worldwide is based on a two-tier system of primary and secondary markets. In Europe, this system generally works as efficiently as in the US, but the European market is significantly more complex.

Why is Europe more complex?

• over 30 exchange venues

• multiple currencies (EUR, GBP, CHF, and others)

• many ETFs are simultaneously listed on several trading platforms

What does this mean in practice?

• The trading volume is distributed across multiple exchanges—making it difficult to clearly assess the total volume.

• Around 72% of ETF trading takes place off-exchange (RFQ systems, systematic internalizers, direct transactions between institutional investors). In the US, it's only about 47%.

• The visibility of ETF liquidity is reduced by the high off-exchange share because these transactions are not reflected in official trading statistics.

• The actual liquidity of an ETF cannot be directly inferred from exchange turnover. Consequently, neither visible exchange turnover nor the displayed prices—especially in larger transactions—always reflect the best available conditions.

What actually matters for investors

The liquidity of an ETF depends less on its trading volume and primarily on two factors:

1. the liquidity of the underlying assets

2. the efficiency of the creation and redemption mechanism between the ETF provider and its authorized participants (APs).

—> For investors, this means: Even an ETF with low exchange volume can be highly liquid.

What Europe is doing

To improve transparency and efficiency, the EU is working on a "Consolidated Tape" that will consolidate trading data from all EU exchanges. This is intended to enable investors to make informed decisions, strengthen competition among exchanges, and advance the integration of European financial markets.

Companies are also taking steps to improve market efficiency. Euronext has announced plans to consolidate the settlement of stock trades across its six European exchanges to increase efficiency and resilience.

—> These developments are intended to make the European market more structured, transparent, and resilient.

4. Regulation: Europe operates differently than the USA

While a major reform in the USA in 2019 accelerated the ETF boom, the European market is developing more steadily and incrementally. Active ETFs in Europe are largely subject to the same regulations as traditional investment funds—a framework familiar to many investors.

The UCITS Directive as a foundation

For over 30 years, it has ensured:

• high investor protection

• uniform rules for fund products within the EU

• EU-wide "passporting" – the ability to distribute funds throughout the European Economic Area.

Within the EU framework, national regulators have the scope to impose additional regulations—therefore, investors should be aware of potential national differences, particularly in the key ETF domiciles:

• Ireland with about 72% of all ETF authorizations

• Luxembourg with about 17%.

A current example is the regulation of so-called semi-transparent active ETFs, which the regulators in Ireland and Luxembourg have now permitted.

—> The portfolio does not have to be disclosed daily, but they may publish their positions at wider intervals.

This means

• protection against strategy copying

• more flexibility for managers

• room for innovation

• continued high investor protection

5. Why these developments are important for private investors

The market for active ETFs is

✔️ broader – more providers, more strategies, more asset classes

✔️ more accessible – previously institutional markets are opening up

✔️ more solution-oriented – strategies with downside protection, income focus, or defined target returns

✔️ retail-friendly – ETF providers are increasingly focusing on private investors

For investors, this means

It becomes easier to build a flexibly managed, diversified, and professional portfolio—without the complexity of traditional funds.

Conclusion: Europe's active ETFs – a market opening new doors for private investors

The European ETF market is changing rapidly. Today, investors want products that offer more than mere index replication—they want flexibility, innovation, and meaningful solutions for different market situations. This is precisely where active ETFs come in.

With increasing diversity, growing demand, and a stable regulatory environment, attractive opportunities are emerging for private investors. The coming years are likely to be decisive for the further development of active ETFs in Europe.

UnitPlus Relevance

At UnitPlus, we see exactly this shift towards actively managed ETFs in the European market—and have integrated it into our investment solutions together with strong partners like J.P. Morgan Asset Management and Goldman Sachs Asset Management.

With portfolios such as AktienPlus (pure equity portfolio with active ETFs) and MultiPlus (multi-asset portfolio consisting of 70% equities and 30% bonds based on active ETFs), private investors gain access to professionally managed strategies—combined with the usual flexibility, transparency, and continuous availability that UnitPlus stands for.