The investment landscape in Europe is slowly changing. Retail investors are increasingly taking the fight to institutional investors as the race for investment opportunities in the equity markets gather speed. Trading volumes in some of Europe’s big Exchange Traded Funds have more than doubled since the start of the year.
Europe’s ETF Demand
The spike in ETF trading volumes comes on the strong demand for investing themes around cannabis stocks, robotics, gaming, and artificial intelligence stocks. Retail investors are increasingly turning to ETFs to gain access to these themes that look set to generate long-term value.
ETF investment has more than doubled to $10.8 billion this year from the same period last year. Most of the investments have gone to investment themes with exposure to cannabis, robotics, and AI investments.
Retail Investors Resurgence
The fact that smaller investors are the key drivers of the ETF market trading volume is a welcome change. Over the years, the European stock market has struggled to develop a retail customer base. While more than 80% of the ETF assets are in the hands of institutional investors, the landscape is slowly changing as more retail investors get involved in the equity markets.
Europe still lags behind when it comes to investor’s compositions in the equity markets. While institutions own huge portfolios in some of the biggest ETFs, so are moms and pops playing an instrumental role in growing the ETF asset base.
Some of the best performing ETFs in Europe include those benefiting from the work-from-home policies in the wake of the COVID-19 pandemic. Among the most popular ETFs in Europe include Van Eck Vectors Video Gaming and eSports Fund, which has around $450 million in invested funds. First Trust Cloud Computing ETF has also attracted close to $340 million in investments.
The Robinhood Retail Investor Factor
Robinhood, which has been the key driver of trading volumes in the stock markets, is emerging as a key driver in fueling retail investor’s involvement in Europe’s ETF landscape. Robinhood has made it extremely easy and possible for most people regardless of trading experience let alone capital to flex their muscle in the equity markets.
Young people are increasingly leveraging the stockbroker mobile apps to gain some exposure in the booming stock market. Likewise, some of the traders have resorted to investing in ETFs as a way of gaining broader exposure to some of the fastest-growing segments of the market.
Robinhood traders have also been the drivers behind the revival of beaten-down stocks in the wake of the COVID-19 pandemic. After stocks plunged to one-year lows at the start of the year, Robinhood traders used the opportunity to buy high-value, beaten-down stocks, most of which were trading at a discount relative to their one-year highs. Likewise, they are credited with being the force behind the ongoing Bull Run that shows no signs of slowing down.