Pension funds are following an “industry-wide trend” of favouring passive management and are “increasingly viewing” exchange traded funds (ETFs) as “attractive investment vehicles”, according to PwC Luxembourg global fund distribution leader, Christophe Saint-Mard.

His comments follow the publication of PwC Luxembourg’s European ETF Listing and Distribution 2024 poster, which revealed that net inflows to European ETFs reached €104bn in the first half of 2024.

Assets under management surpassed €1.8bn with EU-domiciled ETFs experiencing “record-breaking growth” rising from €1.47trn to €1.72trn between December 2023 and June 2024.

In addition, the figures revealed that the ETF market grew by 10.4 per cent between June 2023 and June 2024. Of the EU-domiciled ETFs, 36.5 per cent are environmental, social and governance (ESG) ETFs, disclosing as per Article 8 or Article 9 of the Sustainable Finance Disclosure Regulations (SFDR).

Across Europe, Ireland and Luxembourg remained the most popular ETF domiciles, accounting for respectively 70.8 per cent and 18.1 per cent of cross-border registrations.

Equity ETFs continue to exhibit robust growth, increasing their share of the European ETF market to 73.3 per cent by June 2024. With €1.3tn in AuM, they represent a 3.5 per cent year-over-year increase.

PwC Luxembourg global fund distribution leader, Christophe Saint-Mard, told European Pensions: "In line with an industry-wide push towards passive management, pension funds are increasingly viewing ETFs as attractive investment vehicles.

"This should not come as a major surprise: ETFs have lower management fees compared to traditional actively-managed funds; they are actively traded on stock exchanges, which makes them highly liquid; they bring forth a wide array of diversification benefits — be it when it comes to investing in different asset classes or different geographies.”

He added that ETFs are highly transparent financial vehicles that offer investors the ability to check their holdings daily.

“The appeal of ETFs as a cost-effective alternative to traditional mutual funds is bound to continue growing among institutional investors, and asset managers – large and small alike – will continue tailoring their ETF product offering to suit the specific needs of pension funds. After all, Larry Fink's most recent letter to investors was titled Time to rethink retirement,” he concluded.

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