“The potential for European UCITS exchange-traded funds (ETFs) to further attract investors is considerable,” says the European Fund and Asset Management Association (EFAMA).
EFAMA published the comment in its latest market findings which show the main trends in the ETF market in Europe.
It adds that the delivery of a full consolidated tape for these products in Europe will “inevitably contribute a great deal to the international attractiveness of the UCITS ETF label”.
The association urges policymakers to remain ambitious in delivering the benefits of this initiative, as this “will support the ever greater demand for UCITS ETFs, both in Europe and internationally”.
“The introduction of consolidated equities or a ETF tape will help the European ETF market to reach its full potential and attract more global investors,” says Federico Cupelli, deputy director for regulatory policy at EFAMA.
In its market findings, the association noted the bouts of severe market volatility over recent years, whereby the resilience of the ETF product has been repeatedly tested. It says its findings “debunk many of the previous ‘myths’ around the stability of ETFs”.
“ETFs have, under certain conditions, even acted as pressure valves for investors to trade certain assets in times of heightened stress,” it adds.
Vera Jotanovic, senior economist at EFAMA, comments: “Our report focuses on the growing UCITS ETF market, which has been increasing in popularity among investors. The net flows of European UCITS ETFs have been consistently positive in the last five years, demonstrating resilience despite market turmoil.”
In addition, EFAMA found that the broader ETF ecosystem “continued to operate well under recent episodes of significant market stress, proving that several formerly alleged ETF vulnerabilities simply did not materialise”. ETFs have continued to trade in the secondary market, while contributing to price discovery.
The European UCITS ETF market also displayed “constant growth in sustainable investing”, with persistent net inflows into Article 8 and Article 9 ETFs since the application of the SFDR in March 2021.
Cupelli comments: “The European Commission has recently renewed its interest in the functioning of the EU ETF market. Our recent findings highlight important facts for policymakers to keep in mind when assessing the potential for UCITS ETFs to deliver on some of the objectives of the EU Capital Markets Union project. Their cost-effectiveness and transparency help investors access a growing number of asset classes and strategies, all within the world-class UCITS regulatory regime.”
Tanguy van de Werve, director general at EFAMA, says: “The constant growth of the European ETF market is testament to the many benefits of ETFs and their increasing popularity with investors alongside actively managed investment funds. While the market is still largely dominated by institutional investors, more and more European retail investors invest in ETFs.”
