ETF trends in 2026: What challenges and opportunities are ahead?

Following an extraordinary year for ETFs, Hector McNeil, HANetfs, and Beverly Chandler, ETF Express, discuss the latest ETF trends around the world.

Listen to this Off The Record or read our recap below.

What are the major ETF trends observed in 2025?

Key trends include:

• Defence ETFs: Driven by geopolitical tensions (Russia-Ukraine, China straits, Gaza) and ethical considerations.
• Gold ETFs: Benefiting from dollar devaluation and macroeconomic shifts.
• Crypto ETFs: Experiencing volatility, with mainstream adoption via ETF wrappers.
• Active ETFs: Rapid growth, with inquiries increasing from 2% to 95% in Europe, mirroring the US boom.

Why is the European ETF market fragmented, and what are the implications?

The European ETF market remains fragmented due to multiple listings and tax issues in certain countries like Spain. However, this fragmentation provides a shop window effect, allowing issuers to target specific regional markets. For example, HANetf strategically lists in London, Italy, and Germany, covering 85% of Europe, while secondary markets are chosen based on commercial needs.

What challenges and opportunities exist for liquidity in ETFs?

Liquidity and arbitrage are critical for maintaining fair pricing in ETFs. Challenges arise when issuers misprice assets or lack multiple authorised participants (APs). Hector emphasizes the importance of correlated hedges and evergreen fund structures to address liquidity concerns, ensuring robust market-making and pricing mechanisms.

Why are active ETFs gaining traction in Europe?

Active ETFs are growing due to:

• Increased interest from traditional asset managers and US clients.
• The ability to leverage white-label services for faster market entry.
• Successful launches like Europe’s first catastrophe bonds ETF (CATB), showcasing innovation in active management.

What are the complexities of white label ETF services?

Key challenges in the white-label ETF services market include:

• Conflict of interest in traditional models: Hector McNeil recalls times, where conflicts arose between managing their own products and third-party products. Clients often felt their products were deprioritised in favour of in-house offerings, leading to dissatisfaction and mistrust.
• Concerns with existing issuers: Active managers often partner with competitors, meaning that sharing sensitive IP, such as alpha generation strategies or trade data, could pose risks. Protecting client information can be a challenge.
• Infrastructure and ecosystem risks: Large issuers often offer synergies through their existing infrastructure, but this integration could limit customisation and force clients to operate within the issuer's ecosystem. This could compromise the independence and control of active managers.

What is the future outlook for ETFs in 2026?

Predictions for 2026 include:

• Growth in active ETFs, particularly in fixed income, equities, and options.
• Expansion of structured outcome products like buffer ETFs, autocallables, and covered calls.
• Increased adoption of the ETF wrapper for private capital and niche strategies.

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