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Retail investors are snapping up European ETFs: A new growth opportunity for asset managers

Exchange Traded Funds (ETFs) have been gaining momentum in Europe. Last year, assets in European ETFs reached a record $1.56 trillion, compared to $395 billion 10 years earlier.

Much of this growth has come from institutional investors, allocating increasingly large amounts of capital to the various ETFs listed on stock exchanges across Europe.

But a new player is coming to the fore – retail investors. They now account for around 30% of assets under management (AUM) in European ETFs – but the number is growing. Back in 2020, it was only 26%.

The reasons for this trend are manifold. For starters, there is now a wider range of ETFs tracking everything from broad indices, to thematics, to commodities, to fixed income strategies, and more. There is more choice, which arguably makes the space more attractive to new entrants.

There have also been retail-focused incentives. The EU Commission launched its retail investment strategy last year, designed to attract retail investors to financial markets. Among other things, it aimed to ensure investors are treated fairly, and “duly protected”.

We have also seen the rise of ETF savings plans, most notably in Germany. The easily accessible plans have become very popular – estimates suggest around €200 billion was invested in European ETFs by these savings plans by the end of 2023. extraETF forecasts that this number will reach €650 billion by 2028.

Given the population of Europe is over twice that of the US, it would seem there is untapped potential. Asset managers, therefore, are increasingly eyeing up the European ETF market.

But for asset managers entering a new market, there are challenges. Europe is a diverse market, with differing languages, regulations, and currencies.

HANetf is Europe’s first white-label ETF and ETC provider, partnering with asset managers to break down the barriers to the European ETP market. This can allow asset managers to bring new and innovative products to Europe, with reduced costs and time to market.

For US asset managers – Europe is an appealing prospect. Not only is there demand for US products to be brought to Europe, but Irish-domiciled UCITS ETFs have tax benefits that are often thought of as unique to US funds.

While European mutual funds are typically subject to a 30% withholding tax (WHT) on US equity dividends, Irish-domiciled UCITS ETFs are only subject to 15% WHT. In essence, for every 1% yield on a US equity portfolio, 15 basis points are saved – so Irish-domiciled UCITS ETFs can help add “alpha” to investors’ portfolios.

ETCs meanwhile are the European ETP wrapper of choice for exposure prohibited by UCITS, including single or basket commodities, covered call and put writes, digital assets, currencies, volatility – and much more. With HANetf’s multi-asset platform, asset managers can launch any exchange traded solution in Europe.

HANetf can manage the complexities of building and launching an ETF or an ETC from the building stage all the way through to the maintenance, distribution and promotion stage. From start to finish, HANetf can launch an ETF or an ETC in 8-12 weeks.

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