Talking Heads - Un trimestre remarquable pour les ETF

ETF podcast – 15 October 2025

Daniel Morris: Hello, and welcome to the BNP Paribas Asset Management Talking Heads podcast. Every week, Talking Heads will bring you in-depth insights and analysis through the lens of sustainability on the topics that really matter to investors. In this episode, we’ll be discussing trends in ETFs (exchange-traded funds) over the last quarter. I’m Daniel Morris, Chief Market Strategist, and I’m joined by Daniel Dornel, Head of ETF Research. Welcome, Daniel and thanks for joining me.

Daniel Dornel: Hi, Daniel. Very happy to be here.

DM: If we think about what’s happened over the last few months, there was still a lot of anxiety in the markets [following ‘Liberation Day’] as to whether the shock was going to last longer and cause concerns about global growth.

Three months later, almost all equity markets are higher than they were. Some fixed income markets have lower yields, some higher. So certainly, a decent amount of dispersion on the fixed income side.

Instead of all those worries about the growth outlook, though maybe there is still some in the US, maybe there are concerns that things have gone too far: Valuations for at least some equity markets look high; credit spreads are low. And concerns that we have an AI bubble that’s about to pop. So, plenty of things to talk about. Daniel, maybe you could pick up on some of the trends you highlighted in Q2 and tell us about what you’ve seen in Q3.

DD: Q3 2025 has been really a remarkable period for UCITS ETFs, recording just under €88 billion in net flows, which makes it one of the strongest quarters on record. September, in particular, stood out as a record month with over €35 billion invested.

The momentum we’ve seen so far in 2025 puts the ETF market well on course to surpass last year’s impressive total of roughly €250 billion for the full year. Once again, equity ETFs have led the way, accounting for almost €71 billion of the quarterly inflows. And it’s worth noting that global equity exposures dominated, attracting €30 billion – again a record for global equities for a single quarter.

European equities also remained popular, attracting over €10 billion, with half of that coming in June alone. So, we really started the quarter strongly on the European equity side. An interesting development this quarter was the regained interest in US equities.

And as discussed in our previous podcast, Q2 saw virtually no net flows in US equity ETFs. However, Q3 was very different, with just under €20 billion, mostly in August and September. This renewed appetite for US stocks marks a notable shift in investor sentiment.

And a final word on emerging markets – in equities we also saw interesting flows of nearly €8 billion this quarter.

DM: That’s a key theme you’re highlighting – that in general, investors are looking for as many sources of growth as they can find, not wanting to have that dependency just on the US, the way many people felt they had to in 2024. So, it’s good news that you are seeing inflows not only into the US, but also Europe and the emerging markets. What about the categories of products that have been favoured by investors?

DD: Diving deeper into the equity segment, approximately two-thirds of the flows were channelled into core exposures – ETFs tracking the MSCI World or S&P 500 indices. Another notable trend was the significant return of ESG-oriented equity ETFs, which attracted nearly €14 billion –roughly 20% of overall equity flows.

This is a sharp increase from levels we have seen in previous quarters, which were around 5%. And it marks a considerable change compared to the patterns we have observed over the past two years.

There has also been significant interest in thematic and sector-specific strategies. Sector ETF flows were around €6 billion this quarter with financials – in particular, banks, which took the lead at €3.8 billion, followed by the IT sector with a special focus on US and Chinese equities.

The thematic investment trend continued into Q3. with over €3.5 billion invested. In the earlier quarters this year, almost all thematic flows went into defence-related ETFs. But this time the picture is more diverse. Defence remains the leading thematic with €1.5 billion but AI is following closely.

DM: That’s a good summary of what you’ve seen on the equity side. What about fixed income?

Fixed-income ETFs continued their strong year with over €16.5 billion of inflows during the quarter, consistent with previous periods. Ultra-short duration products led the way, pulling in more than €5 billion in net flows. Here we are talking about very short duration like zero to 1-year maturity, but also synthetic ETFs replicating benchmark rates such as the €STR rate.

Interestingly, we also saw increased allocation to riskier segments, with investment-grade corporate bonds receiving €4 billion, while high yield credit attracted €3 billion. The main interest was concentrated at the start of the quarter, whereas high-yield demand was particularly strong in September.

Government bonds had more modest inflows of €1.7 billion this quarter, in part due to a challenging July where we saw more than €2 billion of outflows, mainly from eurozone exposures. Alongside this traditional growth, there was a renewed interest in inflation-linked products, with around €1 billion invested, mainly in US TIPS [Treasury inflation-protected securities].

It’s also worth mentioning that, in contrast to equities, ESG flows into fixed income were relatively low this quarter. Historically, sustainable bond ETFs have represented around 25% of fixed income flows, but in Q3, this went down to 7%, mainly as the result of a significant outflow of around €6 billion from a single US corporate bond ETF in September.

In terms of regional trends, euro-denominated fixed income exposures still led the way, with more than €8.5 billion of net inflows, but there was a noticeable increase in demand for US fixed income, which gathered over €5 billion in net new cash this quarter.

DM: Well, it sounds like the idea of ‘Sell America’ that we heard so much about after Liberation Day isn’t necessarily coming to pass. I think a lot of investors have found they don’t have a lot of choice – America is an important market when it comes to putting cash to work. Let’s wrap up talking about active ETFs. Certainly, we’ve talked in the past about how they’re becoming more sophisticated, more important in the market. What are some of the developments you’ve seen?

DD: Yes, active ETFs have also seen a significant increase in interest, with Q3 inflows approaching €10 billion. This represents roughly 11% of overall UCITS ETF flows this quarter. On a year-to-date basis, active inflows have already reached €19.7 billion, outpacing last year’s record for this product category.

Mirroring the trend seen in passive products, most active flows continue to target equity products, which accounted for about three-quarters of total inflows. So, on the active side we saw three main categories of products that stood out:

The first was enhanced exposures – products offering broadly diversified exposures with the maximum tracking error budget at around 1%-1.5% for equity products.

The second was income-focused equity strategies.

And the last, on the fixed income side, was short-term maturity products, much like what we have seen with passive funds.

DM: So, this looks to be one of the strongest quarters on record for flows to ETFs. It has certainly revealed continued interest by investors in this type of investment. You highlighted that most of the flows are going into equities, but interestingly, a more global flow than we necessarily saw in the second quarter, notably flows coming back to the US but also continuing into Europe and a pick-up for emerging markets.

In terms of themes – interestingly and encouragingly – ESG-linked ETF flows have recovered compared to the trend you had seen over the last couple of years. In terms of sectors, certainly IT and AI continue to be popular, but also financials and defence.

Daniel, thank you very much for joining me.

DD: Thank you very much for having me. It was a pleasure.

DM: That’s it for this week’s episode of Talking Heads. If you would like more information about ETFs, please reach out to your BNP Paribas Asset Management contact or check out our website for investment insights, ViewPoint.

Just before we go, I’d like to mention that the Talking Heads podcast is available on Spotify and on YouTube. For YouTube, visit youtube.com. And tap or click on Talking Heads.

You’ve been listening to the BNP Paribas Asset Management Talking Heads podcast with me, Daniel Morris, and Daniel Dornel, Head of ETF Research. Please do join me next week. Until then, take care.