More than half of the investment funds and ETFs sold in Europe now consist of passive investments. Over the past three years, this market share has increased from 34 percent to 56 percent. This trend is largely driven by two major US firms, BlackRock and Vanguard.
This information comes from the Fund Family Digest: Europe in 2024, the annual study by Morningstar on the largest fund families marketed in Europe. In this research, Morningstar not only reviews the amounts involved but also assesses the quality of asset managers in terms of how they prioritise their clients› interests.
Each fund house receives a score for the so-called Parent Pillar, based on an analysis of its investment culture, organisational structure, and the philosophy behind its remuneration system. This is one of the three pillars used to determine the Morningstar Medalist Rating.
Top 10 Fund Houses in Europe, to assets in open-end funds and ETFs
Source: Fund Family Digest: Europe in 2024, Morningstar
Of the ten largest fund providers in Europe, only Vanguard receives a ‹High› rating. Vanguard’s fees are consistently lower than average, or even exceptionally low, according to Morningstar. Notably, the five major European providers (UBS, Amundi, DWS, Union, and Nordea) all receive lower ratings than their five American competitors. Vanguard earns a ‹High› rating, while the other four US managers are all rated ‹Above Average.›
Downgrade
Dutch and Belgian fund houses are rated either ‹Above Average› or ‹Average›, with the exception of ING, which is rated ‹Below Average›. Van Lanschot Kempen experienced a downgrade from ‹Above Average› to ‹Average›. Morningstar expresses reservations about the integration of the asset manager within the larger VLK group, particularly concerning autonomy and investment culture.
Morningstar also notes that the firm is «heavily affected» by staff turnover, including within key strategies. However, the research firm adds that Van Lanschot Kempen still «retains the characteristics of an asset manager with a strong investment culture that prioritises its clients› interests,» including «investor-friendly cost structures».
Benelux Fund Houses in the top 100, to assets in open-end funds and ETFs
Source: Fund Family Digest: Europe in 2024, Morningstar
The low rating for ING’s funds is primarily based on the company’s lack of «peer managers» in several areas crucial for a strong investment culture, according to the report. Additionally, its products have a low success rate, with only 28 percent outperforming the median of their respective categories (risk-adjusted) after five years. However, this percentage is not exceptionally low. Major providers such as UBS (25 percent), Amundi (23 percent), and Fidelity (25 percent) face similar challenges.
Passive as the standard
The shift towards passive investing is particularly evident in the figures for Vanguard and BlackRock. Of the 1,483 billion euro in funds BlackRock has sold in Europe, 78 percent are passive. Vanguard, ranked fifth with a total of 360 billion euro, offers almost exclusively passive products, at 98 percent.
The increase from 34 percent to 56 percent in passive products over the past three years highlights this growth. However, Morningstar notes that the position of passive investing in Europe is not yet as dominant as it is in the United States, where passive investing has become the norm.
Meanwhile, active ETFs hold a modest market share of 2 percent, but according to Morningstar, this «hybrid between active and passive» is growing.