New investors appear to be accelerating growth in ETF market
New data from YouGov, commissioned by BlackRock, shows a wave of exchange-traded fund (ETF) adoption from the next generation of European investors.
The research, which explores the age, investment experience and market location of potential ETF investors across 14 European countries, offers new insight into current and future European ETF ownership.
Respondents were asked to signal what if any investment vehicles they invest in today, and what they intend to use to invest in the next 12 months.
Three key trends are clear: ETF markets across Europe have the momentum to grow at pace; ETFs are increasingly being used by people as a starting point when investing; ETF investors are getting younger.
“Assets on European digital investment platforms have grown at 20% per annum since 2019 to almost $2 trillion as at the end of 2022,” explained Jane Sloan, EMEA Head of iShares & Index Investments.
“ETFs have helped to fuel this growth and we continue to see strong acceleration in ETF adoption by younger investors, aged 18-34, and expect that over the course of 2023, this group will account for 54% of new ETF investors.
“41% of these are expected to be first time investors who have learnt about investments through these platforms and value the simplicity and low-cost of ETFs.”
Key growth markets
In terms of market size, Germany already represents the largest number of ETF investors in Europe, due to the evolution of digital distribution platforms and increasing popularity of ETF savings plans.
There is further room for growth, with just over two million Germans, who today don’t currently invest in ETFs, indicated that they are very likely to invest using an ETF in the next 12 months, representing a potential relative growth of 22% in the German ETF market.
Countries with low ETF market penetration represent the greatest growth potential.
In Spain and Portugal, more than a million people are very likely to invest using an ETF in the next 12 months, representing a relative growth of 64% in the combined Spanish and Portuguese ETF markets. France, Belgium, and the Netherlands show high a high combined growth rate at 42%, and the UK growth rate is anticipated to be 56%.
The number of Italian ETF investors is project to grow by over 800,000 new ETF investors, representing a 39% growth in the Italian ETF investment market.
Entry investments
Generation Z and Millennials are emerging as a driving force for growth in the European ETF market, whereas currently, ETFs are largely owned by the 35-54 age group.
Investors aged 35+ represent 63% of current ETF owners, according to YouGov. BlackRock believes that this younger cohort, now participating using ETFs, could be as a result of them being more comfortable with self-directed decision making and the emergence of online investment platforms.
In Europe, the digital market now stands at almost USD2 trillion in assets.
Across Europe, of the next wave of ETF investors, 54% will be aged between 18 and 34 years, compared to only 32% of new investors aged 35-54. This represents a reversal in ownership as those aged 35+ will represent only 46% of ETF owners.
In Germany, the potential two million new ETF investors will represent a 34% increase in the number of 18–34-year-olds investing using ETFs.