BlackRock and Vanguard lead the way, as American asset management giants sweep through Europe with ETFs, doubling their scale in ten years!

A "super alliance" composed of American asset management giants is sweeping the European market with the wave of low-cost passive investing.

According to ISS Market Intelligence data, as of the end of May this year, the assets under management (AUM) of American fund groups in Europe surged from $2.2 trillion a decade ago to $4.9 trillion. Among them, BlackRock manages $1.4 trillion in ETFs and index-tracking funds in Europe and the UK, while Vanguard manages $442 billion.

In contrast, the growth of European peers appears sluggish. During the same period, the AUM of the UK asset management industry increased from $1.2 trillion to $2 trillion, France from $870 billion to $1.5 trillion, while Switzerland and Germany each achieved about a doubling in scale, reaching $1.4 trillion.

The core driving force behind this trend is the rise of passive investing. Pimco CEO Manny Roman warned that "the rise of passive investing is a one-way trend," and for European mid-cap stock fund managers, "the outlook looks incredibly bleak."

Huw van Steenis, a partner at management consulting firm Oliver Wyman, bluntly stated that a "super alliance" led by American companies is emerging and widening the gap with other industry participants.

The ETF Wave Sweeps In, Passive Investing Becomes the Winning Strategy

The rapid expansion of American asset management companies in Europe is closely linked to the explosive growth of ETFs and index-tracking funds.

These passive investment products are highly sought after by investors due to their low fees, with BlackRock and Vanguard being the absolute leaders in this market.

According to ISS Market Intelligence data, BlackRock alone has an ETF and index-tracking fund scale of $1.4 trillion in Europe and the UK. Vanguard, which only established its office in London in 2009, now manages similar assets amounting to $442 billion.

"Based on assets under management, the top three American companies collectively hold 50% of the market share of all American companies operating in Europe," said Jinesh Shah, Deputy Director of ISS MI.

Jon Cleborne, head of Vanguard's European business, also pointed out:

"We see a significant shift happening across Europe—people are moving from expensive, underperforming funds to low-cost options."

"American Home Court" Scale Effect Becomes Key Advantage

American asset management companies' successful "outreach" to Europe is supported by the key scale advantages and fertile ground for innovation provided by their large domestic market.

Felix Wenge, a senior partner at McKinsey, analyzed that American companies benefit from "the world's largest capital market and faster wealth creation speed," and occupy a leading position in "faster-growing asset classes such as passive investing and private markets."

This scale effect can be easily replicated in global markets Onur Erzan, head of the Global Client Group at AllianceBernstein, stated that being headquartered in the United States "is an advantage in itself," allowing the company to "leverage this scale to establish a global business system" that can benefit its operations in other regions such as Europe.

European Peers Under Pressure, Integration and Differentiated Competition Urgent

Faced with the strong pressure from American giants, local asset management institutions in Europe are experiencing increasing pressure.

Although a number of established European institutions such as UBS, Amundi, and Deutsche Asset Management still hold a significant share in the domestic mutual fund and ETF markets, the urgency to catch up is particularly pronounced.

Mackenzie's Wenge believes that European peers need to achieve scale advantages through integration, but more importantly, "they need to compete in different ways."

This means that, in addition to pursuing scale, European companies may need to find differentiated survival space in products, services, and strategies to cope with this asymmetric competition.

Under the Shadow of Passive Investment, Active Management Still Holds "Winner" Opportunities

Despite the dominance of passive investment, this does not mean that active management has no way out.

Some market participants believe that the rise of index funds has created new opportunities for fund managers focusing on selective strategies.

George Gatch, CEO of JP Morgan Asset Management, believes that the popularity of passive funds means "there are fewer resource-rich competitors in the active management space," providing opportunities for those companies that decide to "dedicate all resources and capabilities to outperform the market."

Manny Roman of Pimco also added that there is a "significant opportunity to increase Alpha through active management in the European market."

Onur Erzan of AllianceBernstein predicts that in the world of active management, there will ultimately be a "limited number of 'winners'."

Even passive investment giant BlackRock emphasizes the importance of its comprehensive capabilities, with Sarah Melvin, head of its European client business, stating that investors place great importance on the company's insights in both public and private markets when "navigating recent market volatility."