25 Years of ETFs in Europe: Ireland's Leadership and Vision for the Future

It’s been 25 years since the first exchange-traded fund (ETF) was launched in Europe. Since then, the market has grown; first steadily, then exponentially. What began as a simple, cost-effective way to track market indices has developed into a more dynamic and complex ecosystem.

The ETF market has now entered the next phase of its evolution, with investors looking for offerings that provide greater diversification, and fund sponsor numbers rapidly expanding — as new providers recognise the increasing importance of creating ETF strategies to complement their existing product suites.  

Ireland has led the way to become the European ETF domicile of choice and whilst the industry is well-positioned to succeed, participants must take heed of these developments and, where necessary, evolve in order to seize upon new growth opportunities.

Expansion and innovation

There remains a huge appetite for ETFs, and an increasingly diverse range of products are coming to market. Despite assets under management (AUM) of US$2.4 trillion in ETFs in Europe to date, the exponential asset gathering in recent years is set to endure, with one industry survey estimating that European ETFs AUM could double in less than five years.[1]

Global growth in active ETFs has also been striking. To date, Europe has lagged behind the United States on this trend. However, our report reveals that the shift to active ETFs is gathering pace in the region, with the momentum illustrated by some noteworthy statistics:[2]

●  In 2024, Europe witnessed a substantial increase in annual inflows into active ETFs, rising from US$7 billion to US$20 billion.

● The number of active ETF products available increased significantly, from 103 to 178, accounting for 25 percent of all new products in the region.

● Inflows into active ETFs represented 74 percent of the total AUM in active ETFs at the beginning of that year.

These figures represent an impressive expansion in active ETFs, albeit from a low base.

We also found that ETF asset managers who were traditionally passive are now looking to enter into the active space. While passive management remains the bedrock of the European ETF market and a crucial component of its success, it’s clear that active ETFs will play a bigger role in the region going forward.

Europe is also witnessing growing interest in other novel products in the ETF space, following trends set in the US. There is nascent demand for CLO ETFs, options-based ETFs, active money market ETFs and leveraged products. These offerings extend the boundaries of investments that can be held within an ETF. Product structuring requirements are also changing, with new and existing issuers increasingly interested in a commingled fund arrangement containing a mix of listed and unlisted share classes.

A balanced approach to regulation

As the ETF market matures and product innovation accelerates, shrewd and timely regulation becomes an increasingly critical factor. For Ireland, it’s about continuing to shape a regulatory environment that fosters advancements while safeguarding investor interests.

In that regard, the Central Bank of Ireland is taking a pragmatic stance and constructively engaging with the industry on areas of product innovation — amending or introducing new rules to remove barriers to entry for new issuers and investors alike in areas such as portfolio transparency, fund-naming conventions and new ETF offerings. This partnership has been instrumental in driving positive change and helping to create a robust ecosystem. It's vital that our public and private sectors continue to nurture such collaboration to ensure Ireland remains at the forefront of ETF product evolution from a policy, technology and operational perspective.

Irish issuers must adapt and scale – The role of a service provider      

How can Irish-domiciled funds take advantage of the new growth opportunities outlined in our ETF Outlook? A key success factor will be for ETF issuers to access a future-ready operating model that offers maximum scalability, transparency and efficiency.

As product complexity grows or as fund providers expand internationally, jurisdictional differences make it imperative for an ETF issuer to have a platform that can support a truly global operation. They will want to work with servicing partners that leverage global technology and can commit to an ETF technology roadmap that anticipates market growth. Service providers can achieve this by leveraging an integrated, future-ready platform that provides consistency and operational efficiency across ETFs and non-ETFs covering all major markets.

Supporting new market entrants

New entrants to the ETF market, particularly active managers, may face challenges utilising existing technology and sourcing internal operational expertise to stand up an ETF business and thus seek out asset management tools tailored to ETFs, and/or delegate daily ETF operations management to a third party.

Great strides have been taken across the industry, by both new platforms and existing service providers alike, to build solutions that provide additional cost-effective and time-efficient market entry options for new ETF issuers — increasingly offering flexibility in the service set — to meet issuers where their needs are greatest.

Another key consideration for many new entrants is how to leverage their existing track record and shareholder base. One option is to add ETF share classes to their already established funds — an approach that allows the new ETF share class to inherit the previous performance history, while greatly simplifying the launch process compared to setting up an entirely new ETF. Service providers with unified platforms capable of servicing both mutual fund classes and ETF classes within the same fund are well-positioned to meet this need.

The way forward

The European ETF market is set for a new wave of growth and innovation. The momentum behind active management is building. Product innovation is accelerating. For Ireland, while the 25th anniversary of European ETFs is a milestone to celebrate, 2025 is a time to critically assess how Ireland is positioned for this next phase of growth. Industry participants who develop the right strategies, operating models and partnerships can set themselves up to thrive. Exciting times lie ahead.

Terri Dempsey, CEO and Country Head of State Street Ireland

“As the European ETF market enters this dynamic new phase of growth, maintaining Ireland's leadership will hinge on our ability to utilise the ecosystem to develop truly scalable and efficient operating models evidencing continued dynamism and evolution of the sector."

Get more insights from the 2025 Global ETF Outlook Report

[1] ETF 2029, The Path to $30 trillion, PWC, 2025

[2] Global ETF Outlook, State Street, 2025