Jeff Baccash : A warm welcome to our first episode of ‘ETFs Unwrapped’, a guide for asset manager CEOs and operational leaders looking at launching ETFs in Europe
Over the course of 2025. We’re going to have some great guests from around BNP Paribas who are going to take a deep dive into the ETF landscape, how they really work and the decisions that operational teams need to consider.
I am Jeffrey Baccash, Global Head of ETF Solutions at BNP Paribas’ Securities Services business, and I will be your guide throughout this journey. And I cannot think of a better way to start it off than talking to another Jeff, Jeff Zoller from our Client Solutions team.
So, Jeff, can you introduce yourself to our listeners?
Jeff Zoller : Well, first, Jeff, congratulations on the launch of this podcast.
The growth in the ETF market shows no signs of slowing. And with continued product innovation and markets, new entrants into the space, there’s definitely a lot to unpack here. Pun intended, by the way! So thank you for having me. I’m very excited to be your first guest.
A little on my background. I’m the head of the US Asset Manager segment within Securities Services at BNP Paribas, responsible for the products and solutions that we offer to investment managers and other institutional investors in North America.
Prior to BNP Paribas, I spent 20 years at a large global investment manager with a substantial ETF range that was built over time. At that firm, I was responsible for operational strategy within global investment operations. This included ensuring operational readiness for any new investment vehicles, instruments, markets, client segments that the firm was entering.
As it pertains to ETFs, specifically, I led the definition of the operating model and service provider selection that supported the firm’s launch of their line in the US.
ETFs Market Overview
Jeff Baccash : Great, Jeff. So with your industry experience, I can’t think of anyone better to invite on our first episode. In today’s episode, we’re going to be looking at the ETF market, where it’s heading, and starting to look at what that means for COOs in setting up the right operating model when entering the market.
So can you kick us over off with an overview of the market, Jeff?
Jeff Zoller : The value of global ETF assets under management grew to over USD 15 trillion in 2024[1]. In the US, ETFs saw $1.2 trillion in inflows[2]. The previous record was in 2021, where there was $900 billion[3]. So you can see a significant increase. But the story in Europe is even more interesting.
Last year, ETFs in Europe grew to over $2 trillion[4], with active ETFs growing by nearly 70%, bringing the total value of active ETFs in Europe to $55 billion[5]. That might not seem like a lot, but consider this Nick Cherny, who’s the head of innovation at Janus Henderson, predicts that European domiciled, actively managed ETFs will grow to over $1 trillion by 2030[6].
So that’s growth from $55 billion today to over $1 trillion in 5 years. That’s a big increase. Do you think it’s realistic based on what you’re seeing in the market?
Jeff Baccash : Yeah, absolutely. In fact, at the end of the year, Bloomberg hosted an event and their bull case for ETFs in Europe in 2035 – so ten years from now – is USD 9 trillion. So if you think about it $1 trillion and $9 trillion – that’s very feasible for the active market. And I don’t think that whole $9 trillion can just be passive, as we’ll be going through various economic cycles in in the next ten years.
Investors are going to be seeking alpha. And as a result, I believe what’s driving the growth will be active ETFs. So, I do see this trend coming to Europe more and driving further growth. I think the best example for the EU market is with ESG ETFs.
I think the transparency of the ETF, and transparency as an important concept throughout the whole ETF industry, complements ESG strategies very nicely. Time has shown that accurate information is critical for sustainability. Jeff, do you agree or disagree with this?
ETFs & ESG
Jeff Zoller : I agree, and this is one element of a larger shift, driven in part by younger generation of investors who are seeking opportunities to enhance performance along with increase increased liquidity, greater transparency and access to a broader range of instruments and investment strategies, including those strategies that align with their values or issues that are important to them, such as ESG.
Now, this demand, coupled with the relative immaturity of the European market when compared to the US, really creates a significant opportunity, and investment managers are responding in kind, extending their active strategies beyond the traditional fund wrapper to the ETF. A recently completed independent survey of wealth managers across Europe show that 94% expect to increase their use of active ETFs in the next 12 months[7].
Navigating the Operational Challenges of ETFs
Jeff Baccash : You’re really setting the stage for this podcast series. Thanks, Jeff.
To put things in perspective, one brand new ETF, IBIT[8] grew to $55 billion in just one year. So I think your hypothesis, especially related to alternatives, is spot on. But all this leads to some operational challenges. How should CEOs and operational managers be thinking about that?
Jeff Zoller : Well, Calastone recently partnered with ETF Stream to survey the main participants in the ETF ecosystem, fund issuers, the authorized participants (APs), service providers[9].
And when asked how service providers rate their own ETF servicing technologies, 60% of them rated themselves as very good versus good or adequate. Now, interestingly, when you look at the APs, 50% rated service provider technology as just adequate, while 61% of the fund issuers said that service provider technology is either ‘adequate’ or ‘poor’[9]. So there’s definitely a perception difference here.
And what’s causing this?
Well, active strategies create complexity in the subscription redemption processes. Baskets whose compositions change daily. The ability to acquire and deliver certain types of securities in the basket versus having to substitute cash. And the mismatch of settlement cycles across markets, just to name a few issues.
Innovation also stresses operational systems, so as ETFs invest in new instrument types, investment managers and service providers will need to ensure that their systems can not only scale for volume but also be able to handle these newer and more complex instruments.
And this is particularly important when you talk about the connectivity with the APs; ensuring the ability to create trade baskets and process creation or redemptions orders timely, efficiently and accurately is very important.
Key Takeways
Jeff Baccash : This is where your insight is so helpful. Jeff. Having led large scale operations at a major global asset manager, and your experience in helping BNP Paribas deliver the underlying services and support for ETFs, what are some tips that people can take away from the podcast?
Jeff Zoller : I’d suggest you start with your service providers. They play an important role here, not only in implementing your target operating model, but also in how they can support your growth ambitions.
So first, ensure you’re partnering with a firm that has a strong core. I tend to look at this as their industrial strength operating model. It’s the basic blocking and tackling, doing the core things well that allow a firm to allocate their strategic resources on what are their real competencies- investment management and distribution capabilities – rather than focusing on building customized or bespoke operational solutions that inevitably lead to higher maintenance and higher costs for the investment manager.
Then, evaluate how your strategic service provider can go beyond the core servicing capabilities. A firm that has the ability to help launch or grow your business across the value chain with expertise and support for product launches, market entry, financing, distribution, regulatory risk support, and other related processes. Really think about them as an extension of your own firm’s product development team. And Jeff, I think this is where you and your team have excelled.
That ability to take a consultative approach and understand a client’s broader role, goals and objectives as they develop their strategies. Also important is a deep knowledge and strong connectivity in the primary market space, as I mentioned earlier. Someone that can bring advanced level of scale and automation with the APs, with a clear path showing continuous growth and enhancement as this market continues to evolve.
Think about an example where clients have a multi-provider strategy and the AP has to interact with multiple parties in this chain. A service provider that can come in and help streamline this connectivity for the APs really can bring significant value. And lastly, look at the innovation that’s occurring throughout the world and how that influences your strategy and roadmap.
In the US, we saw the introduction of ETFs with a private capital strategy. This convergence of public and private now entering the ETF space is creating a significant challenge for service providers, systems and staff that efficiently support the registered fund or the retail wrapper, for example, having fully evolved to handle the complexity of private assets. Now think about layering on an added dimension of doing this within the ETF.
While service providers may have had to have each of the individual pieces, it’s important to understand what their plans are for integrating these so that they really bring it together into a cohesive offering, rather than having to worry about the growing pains that you’re going to endure as they go through this evolution.
ETF Solutions and Evolving Challenges
Jeff Baccash : Now that you mentioned the convergence of public and private assets, what would be some of the nuances that would need to be solved for inside the ETF vehicle, versus how they have been classically handled in the past?
Jeff Zoller : Well, we talked earlier about technology and automation supporting the subscription or redemption processes. This becomes much more complex when you’re dealing with illiquid, semi-liquid or certain other complex instrument types.
So to give one example, Nasdaq recently submitted a proposal to the SEC on behalf of Blackrock[10] to modify rules that allow in-kind creation or redemption for spot Bitcoin ETFs. While this may have some benefits for the investor and ultimately be more operationally efficient overall, an ETF is really going to need to develop the capabilities that allow them to securely manage Bitcoin transfers, which works much differently than in-kinds for equity and fixed income securities.
So this could be a significant change for a number of firms. And valuation, while not specific to the ETF wrapper, has been an issue that’s getting a lot of attention. Historically, the valuation of illiquid assets, such as private credit, has occurred on a periodic basis, generally monthly versus daily. And finding independent third party market data providers or developing in-house models that create daily valuations is something that’s going to take time to really do effectively and responsibly.
Jeff Baccash : Amazing. Jeff, I really appreciate you taking the time to be our first guest today. I think this was the perfect way to set the scene for the topics that we’re going to be getting into throughout the year.
Watch this space for more episodes where we’ll be getting into more detail on how and where to operate your ETF. Thank you very much for your time today and have a great day.
[1] HANETF, Global ETF assets surpass $15 trillion – HANetf – Europe | Independent ETF Investment Platform
[2] USD 1.17 trillion, rounded up to 1.2, ETFGI ETFGI reports the ETFs industry in the United States gathered a record US$1.17 trillion during 2024 | ETFGI LLP
[3] Reuters, Global ETFs saw record inflows in 2021 | Reuters
[4] Fidelity, https://www.fidelity.fi/articles/analysis-and-research/2024-11-22-2025-year-active-etf-1732277497070
[5] Moneyweek, https://moneyweek.com/investments/etfs/etf-assets-popularity
[6] US$1 trillion by 2030: the rise of active ETFs in Europe – Janus Henderson Investors – Switzerland Professional Advisor (EN)
[7] HANETF, Thematic & Digital Assets Review | H1 2025 – HANetf – Europe | Independent ETF Investment Platform
[8] IBIT = iShares Bitcoin Trust: BlackRock’s Bitcoin Fund Became ‘Greatest Launch in ETF History’
[9] Calastone: https://www2.calastone.com/Navigating_the_future_of_ETFs_research
[10] TECH TUESDAY: SEC Approves First-of-Kind Options on Spot Bitcoin ETF (Nasdaq: IBIT) | Nasdaq