How retail European investors started using ETFs

When have retail investors in Europe started to use ETFs? Relatively long ago, as evidenced by the ETFs’ rapid increase of 2020.

According to data from Morningstar, themed ETFs have drawn significant inflows month after month during 2020, which was a significant indication that the retail market was beginning to participate in ETFs on this side of the ocean.

In the first half of the year 2020, European thematic exchange-traded funds (ETFs) raked in almost €3.1 billion, compared to just €1.1bn seen in the whole of 2019.

Total assets under management (AUM) in the exposure increased during the 18 months of asset growth and inflows, rising from a little under €6 billion at the start of 2019 to just under €12 billion at the end of June.

In the first half of 2020, monthly flows had fluctuated from €84 million in March, when instability due to the coronavirus struck, to €913.3 million in January.

According to Kenneth Lamont, senior analyst for manager research at Morningstar, the transition to a remote economy has given investors several chances to profit from a variety of topics.

The Van Eck Vectors Video Gaming & eSports UCITS ETF (ESPO), the First Trust Cloud Computing UCITS ETF (FSKY), and the iShares Healthcare Innovation UCITS ETF (HEAL) have all seen substantial flows as a result of Covid-19.

However, according to ETF flow data, investors continue to place high importance on sustainability despite the difficulties brought on by the coronavirus.

The iShares Global Clean Energy UCITS ETF (INRG), which attracted about half a billion euros in new flows, has been the largest beneficiary, according to Lamont. “The instability in the traditional energy markets has once again highlighted the necessity of moving away from non-renewable energy”.

Bloomberg Intelligence also witnessed the similar trend for Europe at that time. Retail-focused investment platforms like Robinhood have noticed a major shift towards thematic products in the US and Australia.

Institutional investors still account a huge share of all European ETF trade, according to the London Stock Exchange, making retail investors a difficult market for ETF issuers in Europe to break into. Still, it appears that they are now growing rapidly.  


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Thematic expert Rize ETF, has entered the European market also in 2020. The retail market was a specific area of concentration for the company, according to Stuart Forbes, co-founder of Rize ETF, in a March 2020 interview with ETF Stream, a leading web media for ETFs.

“It is crucial that everything we put out there is tailored towards the retail audience as well as the fact that we see it as a growing market,” he continued.

He also added that the retail audience responds more favorably to thematic initiatives but that this trend has not been well exploited in Europe because no one is the market leader in that region.

With two ETFs when it first entered the market in February and two more in September 2020, Rize ETF had then a spectrum of ETFs with slightly over $30 million in assets under management.

Other ETF issuers also introduced thematic ETFs in 2020. First Trust introduced an ETF focused on biotechnology and cybersecurity, while Lyxor introduced a group of ETFs with a similar theme.

Thematic ETFs are intriguing products, but they might not be good investing options from a wealth management standpoint.

Peter Sleep, senior investment manager at 7IM, stated in the Q3 edition of Beyond Beta that “thematic ETFs are usually intriguing since they illustrate what is going on in the market, but I am not sure that I would ordinarily buy though.”

But given that thematic ETFs have seen significant asset growth in Europe in 2020 in terms of both capital gains and net flows, the returns for any kind of investor were undoubted.