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When looking at the structure of the assets under management in the European ETF industry one might be surprised about the relatively low market share of bond ETFs since bonds are one of the main asset types and have a respectively high weighting in the overall European fund industry. In more detail, while Bond ETFs held €435.6 bn, or 18.05% of the assets under management, in the European ETF industry at the end of September 2025, bond products (mutual funds and ETFs) accounted for only €3,969.0 bn, or 23.19%, of the overall assets in the European fund industry as of September 30, 2025. By the way, roughly the same pattern can be found in the segment of passive mutual funds (index trackers) since the bond funds in this segment held €882.6 bn, or 20.00%, of the overall assets in passive mutual funds in Europe.

Graph 1: Market Share of Assets Under Management in the European ETF Industry by Asset Type

(Click on image to enlarge)

Source: LSEG Lipper

Why are bond ETFs lagging behind in market share and can they catch up?

First of all, even as the first bond ETFs have been launched shortly after the first ETFs have been introduced in Europe, the rise of bond ETFs started quite late since the first products were rather specialized products which seem to be not fitting the expectations of investors. That said, the rise in assets under management in bond ETFs started when the ETF promoters in Europe started to launch new bond ETFs. But even as investors can now choose from a range of products which cover literally all major bond markets and also some niches, the growth in bond ETFs is behind the growth in bond mutual funds.

One reason why investors may prefer actively managed bond funds over ETFs can be seen in the fact that bond indices are normally giving the highest weight to those borrowers who have the highest debt outstanding and cover all bonds in a market (segment). Conversely, actively managed funds try to avoid the losers, hence those companies which might be able to pay back the principal or the interest in the future. In addition to this, active managers try to buy those bonds of a given borrower which offer the best risk/return profile to enhance the (risk adjusted) returns of their portfolio. Not to mention that active managers do a lot more to optimize the returns of their portfolio as they may use so-called modern portfolio management techniques to adjust the duration or the overall credit quality of their portfolios. With regard to this, it is understandable that investors see bonds as a natural habitat for active managers, even as not all of these managers are successfully beating their benchmarks.

With regard to the above, the answer to the question above is from my point of view that actively managed bond ETFs will be growth driver for the European and even the global ETF industry in the future. This is because actively managed bond ETFs will offer investors an even broader range of strategies from which to choose. This means in turn that all arguments which were used against bond ETFs in the past will become obsolete, as those ETFs will offer the same product features than actively managed mutual funds. Even more, I expect that some of these actively managed ETFs will be share classes of well-known actively managed mutual funds, which will have a sufficient proven track record and assets under management right from launch, hence these ETFs will tick all boxes and can instantly be used even by large institutions.

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