The ETF Market: Notable Developments and Insights into its European Evolution

As the ETF market continues to grow, there have been some notable developments in recent weeks. In early April, BlackRock’s world ETF listed on the Deutsche Boerse experienced a sudden 5% drop in price following the release of US jobs data. Despite an investigation that did not reveal any signs of suspicious trading or rule violations, multiple stop orders were triggered which exacerbated the decline. Trading was halted after a 5% volume limit was reached based on the previous night’s closing value.

Meanwhile, Cathie Wood’s Ark Invest has entered the European ETF market by launching three actively managed ETFs spanning innovation, genomics, and artificial intelligence. Anticipation of these launches sparked questions from fund selectors about whether Wood’s success would be replicated in Europe. Despite concerns about its volatile track record and ‘FOMO-stock’ reputation from retail investors, ARK has launched a European roadshow to engage professional investors.

In Q1, European ESG ETF inflows dropped a staggering 94% to €7.1bn from €13.8bn in the previous quarter, accounting for only 16% of the total €44.5bn inflows. This shift reflects a broader investor pivot towards US and global developed market exposures. Despite general growth in European ETFs – which saw assets reaching a record $1.92trn – ESG funds are experiencing a relative decline as investors seem increasingly disillusioned with their prolonged underperformance, suggesting a potential crisis for ESG investing.

These developments highlight both opportunities and challenges facing the European ETF market as it continues to evolve and mature over time. As new players enter the space and existing ones navigate changing market conditions, it will be interesting to see how they adapt and innovate in order to meet the needs of investors and stay competitive in this fast-paced industry.