Exchange-traded funds (ETFs), characterized by their flexibility, diversification, and cost-effectiveness, have steadily gained traction in recent years. However, 2024 could be a banner year where fixed-income ETFs become the investment vehicle of choice for a significant majority of European investors. That’s per a new Stocklytics.com data presentation. The site reports that 83% of professional European investors are upbeat about the prospects of these investment products. Equities, on the other hand, account for 40%.
Available data shows an aggressive uptake of fixed-income ETFs among European investors in 2023. During that time, the products accounted for nearly 50% ($65B) of the region’s total ETP inflows. Current market signals indicate that they will maintain that momentum this year.
Stocklytics’ investment expert Edith Reads concurs with this assessment:
The European economy is on a positive trajectory, having triumphed over the challenges of inflation and high-interest rates. Anticipating adjustments in monetary policies by the Fed and the European Central Bank, ETFs are poised to experience significant gains.
Stocklytics Financial analyst, Edith Reads
Bitcoin ETFs Approval
This month, the Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs. This marked a significant development for heavyweight US fund houses such as BlackRock, Fidelity Investments, Ark Invest, Invesco, and Franklin Templeton.
The SEC’s nod allows these investment giants to introduce regulated products that directly expose retail investors to the world’s largest cryptocurrency, bypassing the use of funds invested in bitcoin futures.
The SEC’s decision has sparked enthusiasm among ETF professionals in Europe, with Hector McNeil, co-founder of HANetf, highlighting the positive impact on broader crypto sentiment. He expressed optimism that the approved US ETFs, particularly those from renowned names like BlackRock, would attract more inflows into Bitcoin, enhancing the overall credibility of crypto as an asset class.
European Exchange Traded Products
The US Securities and Exchange Commission celebrated a historic milestone by approving 11 investment firms. However, it’s important to note that European investors have enjoyed access to listed crypto products for several years.
Introducing Bitcoin ETFs is anticipated to offer convenient and cost-effective entry points for a new wave of digital asset investors. This includes major investment firms with billion-dollar portfolios. There’s growing speculation that industry giants like BlackRock’s iShares unit and Fidelity Investments will play a role in bringing Bitcoin into the mainstream.
However, it’s crucial to recognize that European investors approach the capital markets with a distinct mindset compared to their American counterparts.
Firstly, European investors tend to exhibit a higher level of risk aversion. They have a propensity to save cash at higher rates than their US counterparts. Additionally, their retirement systems are not as heavily reliant on generating returns in the capital markets.
The newfound validation and acceptance from the SEC may entice European ETF providers to explore the launch of Exchange-Traded Products (ETPs), mirroring the successful models already prevalent in Europe.