A shift is emerging in the European market for exchange-traded index funds (ETFs). While inflows into equity products slowed markedly in October, bonds once again moved into the focus of investors.

According to Fidelity International, a net $15.2 billion flowed into European UCITS bond ETFs in October 2026. That was 47 percent above the average of the previous three and 12 months.

"After the exceptionally strong summer months, we are seeing a normalization of ETF flows. At the same time, the balance is shifting: bonds are regaining importance," says Rocco Altobelli, Head of ETF & Index Distribution, Switzerland & Liechtenstein at Fidelity International.

Corporate bonds in particularly high demand

Demand was especially strong for ETFs on corporate bonds. They recorded net inflows of $4.2 billion in October. Compared with the three-month average, that was an increase of 163 percent.

Rocco Altobelli, Head of ETF & Index Distribution, Switzerland & Liechtenstein at Fidelity International. (Image: provided)

Government bonds also benefited from stronger investor interest. Nearly $5 billion flowed into corresponding ETFs, around 24 percent more than the average of the previous three months.

The high-yield segment also developed notably well. High-yield ETFs recorded inflows of $1.3 billion, compared with a three-month average of just $211 million.

Shorter maturities have the edge

Fidelity sees the higher yield level in bond markets as a key driver of the development. "The higher yield level is making bonds an attractive source of returns for investors again," Altobelli explains.

Strategies with shorter duration are currently considered particularly interesting. They allow investors to generate running income while limiting the interest-rate sensitivity of their portfolios.

Equity ETFs lose momentum

By contrast, demand for equity ETFs developed much more cautiously. Net inflows reached $24.2 billion in October, which was 37 percent below the three-month average. North American equity strategies in particular saw a sharp decline. They attracted only $322 million, compared with an average of $9.7 billion in the previous three months.

European equity ETFs recorded inflows of $2.6 billion, while products focused on emerging market equities attracted $1.5 billion. The figures suggest that investors are further expanding their geographic diversification, but are taking a more cautious approach to new equity allocations.

Active ETFs remain on a growth path

The trend toward actively managed ETFs, however, remains intact. According to Fidelity, these also posted positive net inflows in October, extending a streak that has now lasted for more than four years. Altobelli attributes the development to increasing differentiation within asset classes. In bonds in particular, factors such as duration, credit quality and the selection of individual issuers are once again becoming more important.

"The more differentiated the market environment becomes, the greater the need to take a more selective approach within individual asset classes," he says. This points to a development in the European ETF market: alongside continued strong demand for low-cost investment products, targeted bond exposures and active strategies are becoming increasingly important.