In the first quarter of this year, the ETF industry once again experienced significant inflows, both in Europe and globally. For example, Blackrock alone collected a net of 67 billion dollars with ETFs, with the asset manager growing primarily in the ETF segment. Other major ETF providers such as Vanguard or DWS-Xtrackers also report high inflows.

Globally, ETF inflows totaled nearly 400 billion dollars in the first quarter, according to ETFGI. In Europe, ETFs attracted around 52 billion euros in the first three months of this year, as per State Street. Equity ETFs were particularly in demand. Naturally, new records were also set for managed assets. As reported by ETFGI, the global ETF industry now manages a hefty 12.7 trillion dollars.

While passive investing is booming, active fund products are struggling. Passive investing is growing significantly faster, and not only ETF providers but also distributors are witnessing an increasing trend towards ETFs and thus passive investments. This trend seems to have intensified in recent months.

Many reasons speak for ETFs, some of which are familiar, while others may be less so. The high transparency and low fees of exchange-traded index funds are especially well-known. Additionally, there is a growing diversity of products. Besides ETFs tracking standard indices, there is now a wide range of thematic, bond, as well as active or sustainable ETFs available. However, when markets are performing as they are currently, renowned equity ETFs tracking standard indices are highly sought after as well.

One significant reason for ETFs is also the fact that most active funds do not succeed in outperforming the relevant indices over the long term. This conclusion is also supported by the latest calculations from S&P Dow Jones Indices. The underperformance rate of active funds on global equities and US equities over ten years is 98%. In other words, only 2% of active funds outperformed the index over the long term.

Another reason for the increasing trend towards passive investing is its advancing digitalization. While the traditional distribution model, where a customer goes to their bank and purchases a fund, insurance, or maybe a savings bond, still exists, it is losing importance.

Funds are now often bought as ETFs rather than sold. ETFs are purchased cost-effectively through apps or the websites of fintechs, neo, and discount brokers. This is the preferred distribution channel for young people and, of course, an increasing number of baby boomers. After all, the internet is now available everywhere, and with smartphones, it's even in your pocket.

Digital distribution comes with a plethora of information. There are free pieces of information from independent consumer portals that reach millions of people in this country. But ETF providers also offer an increasing wealth of information about their products, which are usually more factual than overly promotional.

Digital distribution now meets a digital generation, meaning often well-informed young people. They know, for example, that it is sensible and necessary to save for their future and that a monthly ETF savings plan is an efficient and cost-effective method for doing so.

Against this backdrop, ETFs are also on the fast track here in Germany and in Europe. The US, with its significantly higher share of passive investing, serves as a role model. The prognosis is not difficult: The ETF industry will grow above average in Germany and Europe in the coming years.