European investors are restructuring their portfolios and moving away from the strong US focus. New data shows one of the biggest geographic shifts in the ETF market in years.
• European investors were stuck after the US election 2024 over 60 billion euros in US large cap ETFs
• In 2025, inflows into US large cap ETFs shrank to just 6.2 billion euros
• European large-cap ETFs turned from minus 12 to plus 41.2 billion euros
The trend reversal in numbers
After the US presidential election in November 2024, European investors poured over 60 billion euros into American large-cap ETFs, according to a Morningstar analysis evaluated by DAS INVESTMENT. In 2025 as a whole it was only 6.2 billion euros. At the same time, European large-cap ETFs turned from minus 12 billion euros in outflows to plus 41.2 billion euros in inflows.
The movement was gradual. According to DAS INVESTMENT, 14 billion euros flowed into European stock ETFs in the first quarter of 2025. In the second quarter it was already 18 billion euros. The third and fourth quarters each brought over 13 billion euros. What began as a cautious shift became a lasting trend reversal.
Investors are not turning their backs on the USA completely. Those who still invested in American stocks in 2025 increasingly did so through globally diversified funds. In the fourth quarter alone, global large cap blend ETFs raised €16.6 billion. These funds still contain 60 to 70 percent US stocks, but spread the risk much more broadly. It’s not about avoiding American companies. It’s about no longer putting everything on one card.
The European ETF market as a whole grew to total assets of €2.72 trillion in 2025, with record inflows of €337.5 billion, according to the Morningstar report “Europe OE and ETF Flows Q4 2025”. iShares topped the provider rankings with 122 billion euros in inflows, followed by Amundi with 46.8 billion euros and Xtrackers with 27.3 billion euros.
Focus on currency hedging and short terms
The change in sentiment on the bond market is particularly clear. USD-hedged bond ETFs, i.e. products that hedge currency risk, experienced a real boom in 2025. In the fourth quarter alone, 12.7 billion euros flowed into such strategies. The logic behind it: Investors want to take advantage of the attractive US interest rates without having to bear the exchange rate risk of a fluctuating dollar.
At the same time, demand for short-term bond strategies increased. With 105.5 billion euros in inflows, these were significantly higher than the 65.6 billion euros of the previous year. Shorter maturities offer less interest rate risk and more flexibility, a profile that has become increasingly important for many market participants in an environment of political and economic uncertainty. Anyone who is willing to pay higher fees for currency hedging and short maturities sends a clear message: controlling risk is more important than the last basis points of return.
As Morningstar analyst Jose Garcia Zarate explains in a Funds Europe article from January 28, 2026, the European fund market in 2025 shows an interesting duality: passive equity funds were the preferred instrument to quickly reduce US exposure, while the record inflows of 310 billion euros into active bond strategies signaled a clear preference for active management in uncertain times.
The rotation continues in 2026, emerging markets as a new diversification
The latest figures for the start of 2026 prove that the reallocation is not a short-term phenomenon. As can be seen from a statement from Fidelity International dated February 3, 2026, the European ETF market started the new year with record inflows. Stock ETFs were 88 percent above their 12-month average, bond ETFs 78 percent above. In January 2026, European equity ETFs posted their second strongest month on record at just under $10 billion. Stefan Kuhn, Head of ETF & Index Distribution Europe at Fidelity International, is quoted in the statement as saying that the rotation from the US to other regions of the world is “by no means over”.
The development in emerging countries is also noteworthy. According to the Morningstar report, emerging market bonds attracted a total of 24.3 billion euros in 2025, after outflows in the previous two years. Emerging market equity ETFs raised around 12.5 billion euros in the fourth quarter of 2025 alone. In January 2026, according to Fidelity, more funds flowed into emerging market equity ETFs ($6.4 billion) than into US products. This indicates a structural shift in capital allocation. Although US stocks remain dominant, Europe and emerging markets are again gaining market share in European investors’ portfolios. The development of ETF inflows since 2025 suggests broader regional diversification.
D. Maier / editorial team finanzen.net
