As demand for passive investment products continues, managers will need robust and diversified value propositions to compete in the market. Two immediate areas of focus should be passive environmental, social, and governance (ESG) investments and thematic investments, according to our latest research.

Sustainability is playing a large role in the European passive fund landscape. Net sales of ESG exchange-traded fund (ETF) assets were almost triple the previous year’s total volume. In the next 12-24 months, 76% of the index fund providers expect significant demand for ESG index funds from institutional investors; 62% expect the same level of demand from private banks. 85% of the ETF issuers Cerulli surveyed across Europe expect significant demand for ESG ETFs.

At the same time, European thematic ETFs had a strong 2020 as the COVID-19 pandemic and other global challenges diverted investors’ attention to long-term trends such as technology and sustainability. ETF Issuers believe that a major driver of the sector’s success is due to increased adoption by private banks and independent wealth managers. 51% of the ETF issuers believe that investors’ increasing focus on the need to tackle specific global issues is a major factor.

Our latest report, European Passive Investments 2021: Achieving Success in a Growing Segment, offers managers insight into the barriers to growth, in-depth coverage of demand and product development efforts, and analysis of distribution challenges and opportunities for passive investments across seven key markets—the U.K., Germany, Italy, Switzerland, France, Spain, and Sweden. If you are interested in passive investing in Europe, this research offers important strategic insight to assist your product development and distribution strategies. Please reach out to our team to learn more about it.