US leads the way in ETF innovation (roundtable ‘New Developments in ETFs’ part 1)

January 26, 2026

_{This report was originally written in Dutch. This is an English translation.}

In part 1 of the roundtable ‘New Developments in ETFs’, seven experts compare the European and American ETF markets. They discuss differences in regulation, investor profiles, product innovation and ESG, and explore why the US is ahead and where Europe can gain ground.

By Hans Amesz

This is part 1 of the report. You can read part 2 here, part 3 here, and part 4 here.

How does the European market differ from the American market?

Sanela Kevric: ‘In Europe, there are multiple markets, regulators and stock exchanges. In the United States, there is only one regulator and one stock exchange, which makes trading considerably easier. Regulation is also an important difference between the two markets. Demand for ETFs in the United States is so enormous because of the tax advantages associated with the ETF instrument.’

Jolien Brouwer: ‘In the United States, ETFs are not bound by UCITS rules. As a result, there is much more creativity in American ETFs. For example, there are long and short ETFs, or ETFs with a single share. It is a great market to get inspiration and see what works and what doesn't.’

Simon Hutcheson: ‘Thanks to a US ETF market rule introduced in 2019, traditional active managers can enter the ETF market in a much more streamlined way. Due to the favourable regulatory climate, the number of ETFs being launched in the United States is simply phenomenal.’

Effi Bialkowski: ‘There are many commission-free platforms in the US, which contributes to the fact that ETF investing by private individuals is much more widespread there than in Europe, where the development of commission-free platforms is still in its infancy.’

Guido Hout: ‘In the US, ESG policy is not being promoted under the current legislative agenda, but rather reversed. Investing in ESG ETFs is declining there, while in Europe there are two trends in the market: investors who demand a strict sustainability policy within ETFs and a group of investors who have invested in these stricter ESG ETFs but are now moving away from them because the tracking error relative to the benchmark is too large for them to accept.’

Why don't we see more managers using the dual share class model to issue both listed (ETF) and unlisted classes of the same fund? Isn't that the fastest route to market for newcomers?

Hutcheson: ‘It's either a question of how we can create more ETF share classes to enter the market with our existing successful investment fund strategies, or how we can convert investment funds into ETFs. At first glance, it seems like an absolute no-brainer, but behind the scenes there are three major challenges. One is taxation: Irish ETFs, for example, can have a significant tax advantage. Another problem is operational complexity. If you look at the differences between investment funds and ETFs in particular, ETFs are very efficient. From an operational point of view, it is quite a challenge to put them into the same investment instrument. Thirdly, there is the product strategy and how you think about positioning an ETF share class within an investment fund. If you have a successful track record in investment funds and you introduce an ETF share class, you generally want to do so at a lower price. In essence, you are then offering the same strategy at two potentially very different prices. The challenge is to ensure that you treat investors in the ETF share class and the investment fund fairly, so that the costs are borne equally by both investors.’

The United States is often at the forefront of trends in ETFs. What are the most important points to look out for?

Federico Sguazzini: ‘The American and European ETF markets differ significantly in terms of size and acceptance, but Europe is catching up. The majority of the European market consists of equity ETFs, but as in the United States, we are seeing a strong rise in fixed-income ETFs, alongside performance-oriented products such as income-generating ETFs. Another important point we can learn from America is that there is a great need for education, so that clients can properly understand what an active ETF is and how they can use it within their portfolio.’

Hout: ‘There is a difference in voting behaviour between American and European fund providers. This is because European fund houses are more ESG-focused, as their client base demands it. When we select sustainable funds, for example, we look at the voting behaviour of American and European funds and see differences in the extent to which they implement their ESG policy through voting behaviour and engagement.’

Kevric: ‘In the US, they are already much further ahead in terms of the acceptance of ETFs. This is mainly because in the US you have to manage your own money when it comes to your pension. The ETF instrument is very accessible and democratic there.’

Hutcheson: ‘In general, there is less friction and fragmentation in almost every area of the market in the US. There are significantly more private investors in ETFs (60% to 70%) than institutional investors, whereas in Europe it is exactly the opposite. Europe can change this by reducing some of the friction and fragmentation.’