Active ETF evolution in Europe: Who’s leading and what’s next?

Active ETFs in Europe are no longer a niche concept, but adoption appears to be unfolding at very different speeds. That’s the conclusion from a recent Research in Finance survey into the attitudes of European institutional investors towards active ETFs.

In some markets, active ETFs have already become a go-to tool for cost-efficient, flexible active exposure. Elsewhere, adoption is slower – due mainly to a wait-and-see mindset driven by legacy investment structures and inertia.

Yet one thing is clear: this is not a passing trend. Active ETFs are moving from alternative to essential, and investors are increasingly reaping the benefits.

So, who’s committing, who’s cautious, and who’s yet to engage on active ETFs?

The investors, watchers and considerers

Our latest research into active ETFs identifies two key institutional investor types shaping adoption trends:

Early adopters (27% of survey participants)

Institutions already integrating active ETFs for their cost efficiency, liquidity, and alpha potential.

Considerers (73%)

A mixed group. Some are optimists, interested but waiting for lengthier track records and product variety. Others are yet to be convinced that active ETFs offer enough differentiation or cost advantage​.

At a country level, some markets have a higher concentration of early adopters, while others are still dominated by considerers.

Pioneering markets: Where interest in active ETFs is highest

Italy and Germany have the highest share of early adopters of active ETFs in Europe, with interest in France gaining rapidly.

Italy is setting the pace. Institutional investors see active ETFs as a cost-effective alternative to active funds and as an alternative to passive ETFs in efficient markets. Active ETFs are seen as especially interesting for ESG investments.

German institutional investors see active ETFs as a tool for managing volatility, particularly in fixed income as institutions adjust to rising rates.

France, still heavily passively-orientated, is warming to active ETFs as a cost-efficient way to combine low fees, liquidity and alpha generation. Insurance firms face regulatory challenges under Solvency II.

Across these markets, passive ETF penetration is already high, making active ETFs a natural extension of existing strategies.

Waiting for proof: The ETF markets on the brink

Switzerland, the Nordics, and the Benelux countries have strong adoption of ETFs, but active ETFs remain under consideration by optimists and sceptics alike.

Switzerland acknowledges the potential of active ETFs, particularly in fixed income, but tax inefficiencies and a preference for local index funds remain obstacles.

Nordic and Benelux investors are highly ESG-focused. They see active ETFs as a potential solution for net-zero mandates, but segregated mandates remain dominant.

These investors aren’t ignoring active ETFs, but they want to see lengthier track records, stronger proof of performance benefits and clearer use cases before scaling up allocations.

UK ETF adoption: Why the UK market is yet to move

UK institutions are the slowest adopters of ETFs in general. The challenge is more a lack of urgency than a lack of interest. UK pension schemes and institutions remain deeply embedded in segregated mandates and mutual funds, making ETFs – active or passive – a lower priority. Even those willing to explore the space often cite a lack of clear differentiation between active ETFs and existing active strategies.

However, there are signs of change. Thematic and ESG-focused active ETFs are emerging as the most likely gateway for adoption, particularly as investors look for flexible, transparent solutions for net-zero mandates and sector-specific strategies. For the UK, the question isn’t so much whether active ETFs offer value as whether they can disrupt an institutional model that has long favoured bespoke solutions.

What’s holding some investors back?

Looking at the key barriers in the markets still weighing their options, hesitation stems from a mix of structural constraints and perception issues:

Knowledge gaps – Many institutions still struggle to differentiate active ETFs from smart beta and traditional active strategies, creating hesitation over their unique value. As more investors see case studies and real-world applications, education will shift from a barrier to a catalyst for adoption. Bridging the knowledge gap is likely the fastest route to wider adoption. J.P. Morgan Asset Management’s Guide to ETFs is a great resource to explore the fast moving ETF landscape.

Regulatory mismatches – In some markets, active ETFs fall into an awkward regulatory space. Solvency II complicates French insurers’ allocations, while Swiss pension funds benefit from tax-efficient domestic funds instead.

Liquidity concerns – Despite the well-documented liquidity advantages of ETFs, some institutions worry about executing large trades efficiently. This perception is holding back adoption, despite the fact that active ETFs provide a blend of diversification and liquidity that is well-suited to institutional portfolios. In this article we have debunked six ETF myths about ETF liquidity.

These barriers are not insurmountable, but they require education, advocacy, and performance data to shift investor sentiment.

What will drive future adoption of active ETFs in Europe?

1. A demonstration effect from early adopters

As early adopters test and prove the benefits of active ETFs, more considerers – whether optimists or sceptics – could be converted. Performance, cost efficiency, and thematic versatility will be key proof points.

2. The big opportunity in fixed income ETFs

Fixed income is an underdeveloped segment for ETFs, but rising rates are changing the equation. High-yield credit, infrastructure debt, and ESG-aligned fixed income strategies are all areas where investors are actively exploring active ETFs, but for now, product availability is limited. As these solutions expand, they could unlock a new wave of institutional adoption, particularly as more investors become familiar with the benefits of accessing fixed income through active ETF strategies.​

3. Thematic and ESG ETFs as a gateway

With sustainability regulations such as SFDR shaping institutional portfolios, investors are looking for active ETFs that allow them to invest with more flexibility than passive approaches. Themes like AI, the energy transition and clean technology are seeing strong demand for active exposure, making thematic ETFs a potential adoption catalyst.

4. Institutional momentum

Once major players allocate more to active ETFs, peer adoption could well follow. This is how passive ETFs initially gained traction, and the same playbook could unfold with active ones.

It’s no longer ‘if’, but when for active ETFs

Wherever institutions sit on the adoption curve, one thing is for certain: active ETFs are not being ignored. For some, the question is rapidly shifting from “should we?” to “how soon?”

As early adopters prove the worth of active ETFs, considerers of all kinds are engaging more seriously. And with cost pressures, regulatory shifts, and changing investment priorities, perceptions of active ETFs are quickly changing.

For Europe’s institutions this is not a passing trend, but a new phase of ETF evolution. Leadership in this space is still up for grabs, but hesitation carries its own risk: waiting too long means playing catch-up in a market that is already shifting.