Industry Insights - It Takes an Ecosystem: What It Really Takes to Build a Successful ETF

According to Morningstar data, European ETFs and exchange-traded commodities attracted a record €337billion in net inflows in 2025, The momentum has continued, nearly €266 billion flowed into the market in the first seven months of 2026 alone, taking assets to more than €3.2 trillion by the end of July.

The significance of these numbers goes beyond scale. ETF growth has persisted through periods of market volatility and is broadening beyond traditional passive strategies. Investor demand is increasingly extending into active, thematic and alternative approaches, while new product structures and mutual fund-to-ETF conversions are giving managers more ways to participate in the market.

As a result, active managers, banks, wealth firms and specialist boutiques are all exploring how ETFs can help them reach investors and remain competitive. A good part of this shift in demand is driven by demographics (a shifting of wealth to younger generations) and the increasing digitalisation of distribution which hand in hand are creating additional tailwinds for ETFs.

Recognising the opportunity, however, is the easy part. The more difficult question is how to turn a strong investment idea into an ETF that can attract assets, trade efficiently and grow over time.

The Market is Getting Broader, and More Competitive

A decade ago, the ETF market was largely associated with passive investing and a small number of dominant providers. Today, that picture looks very different.

Active ETFs are opening the door to a much wider range of managers. Carne's Change 2026 report found that 89% of fund managers expect active ETF inflows to rise further this year.

What's particularly interesting is the widening range of strategies entering the market. Alongside active equity and fixed income products, managers are exploring thematic exposures, liquid alternatives and new pricing structures, including performance-fee models.

Yet growth alone is not a strategy.

The ETF market remains highly concentrated and new entrants face competition not only for assets, but also for investor attention, distribution access and trading liquidity. The firms most likely to succeed are those that begin with a clear understanding of the investor need they are trying to serve.

Who is the product for? What problem does it solve? How is it different (and better) than existing solutions? And why is an ETF the most effective way to deliver that solution?

Those questions matter far more than launching the latest trend. A distinctive investment proposition may be essential, but on its own it is rarely enough.

An ETF is Only as Strong as the Ecosystem Around it

One of the biggest misconceptions about ETFs is that launching the fund is the finish line. In reality, it is only the starting point.

Unlike many traditional fund structures, ETFs rely on a broad ecosystem of participants. Success depends not only on investment expertise but also on how effectively managers connect fund structuring, capital markets, distribution and governance.

Decisions taken early in the process can have significant long-term consequences. Portfolio construction, domicile selection, exchange listings, seed capital arrangements and target investor groups all influence how the ETF trades, how easily investors can access it and how efficiently it can scale.

The rapid growth of ETFs linked to particular investment themes demonstrates what can happen when product design and investor demand align. But attracting initial flows is not the same as building a sustainable product.

Managers must consider whether demand is likely to persist, whether the ETF can continue to trade efficiently as assets grow and whether the supporting infrastructure is robust enough to support future expansion.

This is also why mutual fund-to-ETF conversions and ETF share classes are attracting attention. For some managers, converting an existing strategy can provide a faster route into the ETF market. But a successful conversion requires much more than changing the legal wrapper. Investor expectations, operational requirements, tax considerations, trading characteristics and distribution plans all need to be considered together.

The lesson is simple: ETF success rarely comes from one decision. It comes from ensuring that every part of the ecosystem works in concert.

Investor Outcomes Matter More Than Ever

As ETFs become more sophisticated, regulators and investors are paying closer attention to outcomes.

European regulators are helping managers bring a broader range of ETF strategies to market. Developments such as Ireland's acceptance of periodic portfolio disclosure and greater flexibility around ETF share classes are particularly significant for active managers.

At the same time, expectations around governance, transparency and investor protection continue to rise.

Execution quality is becoming a particularly important area of focus. Investors often compare ETFs based on their headline management fee, but that tells only part of the story. Trading costs, spreads and execution prices can have a meaningful impact on the overall investor experience.

Innovation therefore needs to be matched by transparency. New structures and new fee models may increase choice, but managers must be able to explain clearly how products work, how they create value and what investors can reasonably expect.

Connecting the Journey

The growing complexity of the ETF market helps explain why managers are increasingly looking for specialist support. Carne's research shows that many fund managers already use third parties to help establish legal structures, select service providers and navigate operational requirements, while demand for outsourcing is expected to increase further in the years ahead.

For ETF issuers, the challenge is not simply finding individual providers. It is ensuring that the entire journey is connected, from the first product discussion through structuring, authorisation, launch and ongoing oversight.

That does not mean every service needs to come from a single organisation. It does mean that managers benefit from having a partner that understands the complete picture, can bring together the right specialists and helps ensure that decisions made in one area support broader commercial objectives.

Europe's ETF market continues to offer significant opportunities. But as competition intensifies and investor expectations rise, success will depend on much more than a compelling investment idea.

The firms that prosper will be those that connect product, infrastructure, distribution and governance into a coherent whole. In ETFs, success is rarely built by a single participant. It takes an ecosystem.

Supermodel II shows that outsourcing has long been central to the transformation of asset managers’ operating models. Custody, fund accounting and transfer agency services moved first, followed by middle-office functions as firms struggled with the complexity of managing more assets across multiple jurisdictions. Management company services are now following the same trajectory, as constant regulatory change and growing governance and operational demands make it harder for managers to maintain all the necessary expertise and infrastructure in-house.

We are seeing that evolution extend to ETFs. For managers entering the ETF market for the first time, navigating fund listings, capital markets and different distribution models make building a platform and operating model from scratch complex, costly and slow. Carne’s Supermodel II report found that only 23% are confident they have the in-house operational expertise and resources required to support an active ETF launch in Europe.

For firms seeking to enter the ETF market, significant benefits can be secured by working with an established specialist providing the expertise, infrastructure and complete operating framework needed to move from idea to launch at speed, while allowing the manager to focus on investment management, distribution and raising assets.

Sources: Morningstar: European ETFs Attract Record Inflows in 2024 ¦  Morningstar: Europe ETF Flows, What’s Happening in 2026? ¦ Carne Group: Keeping Track ¦ Carne Group: Change 2026.