Goldman Sachs Eyes Dominance in Europe’s Active ETF Market

Competition Heats Up as Fund Managers Expand Their Offerings

Goldman Sachs Asset Management (GSAM) has set its sights on becoming a leading provider of active exchange-traded funds (ETFs) in Europe, marking a significant shift in the region’s investment landscape. The move comes as demand for active ETFs surges among wealth managers and private banks, prompting major asset managers—including JPMorgan, Schroders, and Jupiter—to enter the fray.

Hilary Lopez, head of third-party wealth for EMEA at GSAM, emphasized the firm's strategic investment in ETF resources, reinforcing its commitment to becoming a dominant player. With new product launches on the horizon, GSAM aims to establish itself at the forefront of active ETF innovation and distribution in the region.

The Growing Appeal of Active ETFs

Unlike traditional passive ETFs, which track indices such as the FTSE 100 or S&P 500, active ETFs attempt to outperform the market by allowing fund managers to handpick securities based on their investment thesis. This strategy offers the potential for alpha generation while retaining the liquidity, transparency, and cost efficiency of ETFs.

The global ETF market has ballooned to $13.8 trillion, driven by investor appetite for lower-cost, flexible investment vehicles. However, active ETFs remain a relatively small segment in Europe, managing around $54.4 billion as of late 2024—less than 0.5% of the broader European fund market. In contrast, the U.S. has seen significant growth in active ETFs, partly due to tax advantages that Europe does not currently offer.

Despite the challenges, the momentum behind active ETFs is building. Market research by Janus Henderson suggests that Europe’s active ETF market could surpass $1 trillion by 2030, reflecting growing investor interest and the industry's strategic shift towards these products.

Industry Competition and Market Dynamics

Goldman Sachs is entering an increasingly competitive space, as other major fund managers double down on active ETF expansion:

• Jupiter Asset Management recently launched its first active ETFs, following years of outflows from its traditional mutual funds.

• Schroders has filed to introduce active ETFs across Europe, further validating the sector’s growth potential.

• BlackRock and Vanguard, the dominant players in the ETF space, continue to lead passive ETF growth but are also exploring active strategies.

The broader ETF domicile battle between Luxembourg and Ireland is also shaping the landscape. Luxembourg, long a dominant hub for European funds, is losing ground to Ireland, which has positioned itself as the preferred domicile for new ETF launches due to regulatory advantages.

MY ANALYSIS: A Calculated but Risky Bet

GSAM’s push into active ETFs in Europe is a calculated response to shifting investor preferences and competitive pressures. Traditional mutual funds have suffered from outflows due to high fees and underperformance, while ETFs—especially passive ones—have been the primary beneficiaries. By embracing active ETFs, GSAM is attempting to leverage its in-house expertise while tapping into a product that offers the best of both worlds: active management and ETF efficiency.

However, several challenges remain:

1. Performance Scrutiny – Active ETFs need to consistently outperform passive benchmarks to justify their higher fees. Given the efficient nature of developed markets, this will be an uphill battle.

2. Fee Sensitivity – While active ETFs are generally cheaper than mutual funds, they still command higher fees than passive ETFs. Investors may remain hesitant unless performance warrants the premium.

3. Regulatory and Tax Limitations – Unlike in the U.S., where tax efficiency has driven active ETF growth, European investors do not enjoy the same tax benefits, potentially limiting adoption.

   
   

That said, GSAM’s deep resources, global reputation, and established distribution network give it a competitive edge. If it can demonstrate strong fund performance and competitive pricing, it stands a chance of capturing a significant share of this nascent but rapidly growing market.

MY OUTLOOK: The Future of Active ETFs in Europe

While passive ETFs will likely remain dominant, the active ETF segment is poised for exponential growth as investors seek greater flexibility and enhanced returns. Europe tends to follow U.S. market trends, and if active ETFs gain traction, we could see a shift in asset flows away from traditional funds.

Goldman Sachs’ entry into this space is a clear signal that active ETFs are not just a passing trend, but a major growth opportunity. The next few years will be crucial in determining whether European investors fully embrace this model or remain cautious due to past skepticism towards active management.

For now, the competition is heating up, and only those who can deliver consistent outperformance will thrive.