Europe’s ETF market continues to evolve at pace. Growth in active ETFs, increasing product sophistication, shifting settlement dynamics and ongoing debate around fund domicile are all reshaping how issuers think about strategy, structure and scale.
These were some of the central themes explored in our recent invite-only ETF roundtable held in Luxembourg. Led by BNY’s Ben Slavin, Global Head of ETFs, and Steve O’Brien, EMEA ETF Product Lead, the discussion brought together a range of industry perspectives from clients across product, distribution, oversight, operations and legal. The conversation explored where the European ETF environment is heading, what is driving change, and what managers need to think about as they build for long-term growth.
Six key takeaways emerged from the session as asset managers look ahead to the next phase of ETF growth in Europe.
1. ETF growth in Europe remains strong
One of the clearest themes from the discussion was the strength of the current ETF market activity. Launch volumes remain at record levels, and participants pointed to a market environment where innovation and issuance continue at speed. Active ETFs, in particular, were highlighted as a major driver of growth, reflecting broader investor appetite for strategies that combine the wrapper efficiency of ETFs with the potential for generating alpha.
There was also a clear sense that Europe remains a significant opportunity for asset managers looking to expand their ETF footprint. Cross-border growth continues to matter, and firms are actively assessing how to position products for different investor segments and regional distribution opportunities. While competition is intensifying, the overall direction of travel is clear: the ETF market in Europe is still expanding, and active strategies are playing an increasingly important role in that story.
At the same time, growth is becoming more nuanced. Launching a product is one thing; building assets under management is another. The conversation made clear that success is no longer defined by speed alone, but by the ability to align launch activity with real investor demand, effective distribution and distribution readiness from day one.
2. Distribution and client fit matter more than structure alone
A consistent takeaway from the roundtable was that fund structure, while important, is rarely the deciding factor in commercial success. Distribution teams tend to focus less on structural mechanics and more on whether a product is relevant, differentiated and aligned to client demand. In other words, product-market fit continues to outweigh structural elegance. This is especially important in a European ETF environment where investor bases are diverse and routes to market vary.
Pension schemes were mentioned as one important segment, while broader institutional and intermediary demand continues to shape product design and launch strategy. Participants also noted that a large share of ETF trading takes place on a negotiated basis, reinforcing the idea that market access, liquidity support and investor targeting are critical parts of the go-to-market equation.
The discussion also touched on the long-term question of market saturation: how many ETFs can the market ultimately support? While there is no simple answer, the implication was that the winners will be those firms that can match product innovation with a clear distribution strategy, rather than simply adding more products to the shelf.
3. Operational readiness is a real differentiator
ETF success depends as much on operating model strength as on product design. Participants highlighted the importance of early NAV calculation, day-two operational readiness and the broader infrastructure required to support issuance and trading. These capabilities are increasingly seen as essential, not optional.
The roundtable surfaced a number of practical operating model questions that firms are actively working through: the economics of launching and scaling ETFs, the cost base required to support the platform, the role of market makers, how many APs are needed, and the importance of a capable capital markets function. These are not back-office details; they are core strategic choices that influence launch efficiency, liquidity and the end-investor experience.
As ETF ranges expand, operating discipline becomes even more important. Firms need models that can support scale without allowing complexity or risk to grow unchecked. That is especially true in a market where servicing capacity is competitive and where newer providers may find it harder to establish themselves. The European ETF landscape is maturing, and operational excellence is increasingly a source of competitive advantage.
4. Luxembourg vs Ireland as fund domiciles
The discussion around ETF domicile in Europe remains highly relevant, with Ireland and Luxembourg continuing to dominate the conversation. Participants noted that many firms may still follow the Irish route, particularly where tax treatment, ecosystem familiarity and established market practice support that decision. References to US equity tax rates also reinforced the extent to which tax considerations remain part of domicile selection.
At the same time, the roundtable highlighted growing interest in the Luxembourg ETF opportunity, particularly in the context of active ETFs. Questions were raised around what Luxembourg offers from a product perspective, what infrastructure is already in place, who the target investor audience is, and whether market knowledge is sufficiently developed. This suggests that for some managers, Luxembourg represents not just an alternative domicile, but a potential growth opportunity if ecosystem support continues to deepen.
The broader takeaway was that domicile choice should not be viewed in isolation. It sits at the intersection of regulation, tax, distribution ambition, operating model and long-term product strategy. As the ETF market in Europe becomes more sophisticated, firms are likely to assess domicile decisions less as a binary choice and more as part of a wider platform build.
5. Market structure and regulation are evolving
Participants also explored how market structure is changing and what that means for ETF issuers in Europe. Settlement reform was one example, with T+1 and the 2027 timeline referenced in the discussion. While settlement changes may appear operational in nature, they have broader implications for ETF distribution, infrastructure and readiness across the value chain.
There was also a sense that current market capabilities do not always fully match product ambition, especially as the industry moves into more sophisticated ETF structures. Questions around infrastructure readiness, servicing capacity and execution support all point to a market that is still adapting to the next phase of ETF evolution. This is particularly relevant for more complex exposures and for firms seeking to differentiate through innovation.
Regulatory and supervisory flexibility was also touched on, with remarks that regulators may be willing to engage constructively, particularly around more complex instruments. For issuers, this creates opportunity — but also places greater emphasis on bringing products to market in the right way, with appropriate governance, infrastructure and investor clarity.
6. Innovation in ETFs is broadening rapidly
Perhaps the most dynamic part of the discussion centered on product innovation. Participants pointed to a broadening opportunity set that now extends well beyond traditional index exposures. Themes included crypto-related ETFs, options-based strategies, hedging products, downside protection, defense ETFs, multi-asset structures, derivatives, CLO exposures and synthetic ETFs — the latter already seen as an established part of the market.
There was also discussion around how firms think about product suite construction more strategically. Some want ETF ranges that align closely with distributor needs, while others are considering issues such as cannibalization risk or whether existing mutual funds can be converted into ETFs. This points to a more mature innovation cycle, where the question is not simply what can be launched, but what should be launched and how new products fit into a broader platform strategy.
Tokenized ETFs and digital assets emerged as a particularly forward-looking area of interest. The conversation touched on the importance of effective, well‑aligned regulation, bringing products to market thoughtfully, and recognizing that digital innovation is likely to continue shaping the future ETF landscape. For firms watching the next wave of ETF trends in Europe, tokenization and digital wrappers are likely to remain areas of close attention.