In Episode 2 of our ETFs Unwrapped series, Global Head of ETF Solutions Jeff Baccash looks at the two largest ETF domiciles in Europe, Ireland and Luxembourg. Both domiciles have seen great growth in recent years, but what are the practicalities of setting up ETFs here? If you’re considering either or both domiciles for your ETF range, what are the recent changes that will affect your decision, and future changes we might see? Jeff is joined by Shany Venon from Luxembourg and Ian Kelleher from Ireland to discuss.
Jeffrey Baccash: Thank you for joining our second episode of “ETFs Unwrapped” a guide for asset manager COOS and operational leaders looking at launching ETFs in Europe. I am Jeffrey Baccash, Global Head of ETF Solutions at BNP Paribas’ Securities Services business and I will be your guide throughout this journey.
Today we are going to focus on the two main ETF domiciles for Europe, Ireland and Luxembourg. Both domiciles have seen great growth in recent years. Together they make up the vast majority of ETFs in Europe. But what are the recent developments and the advantages of setting up ETFs in these two domiciles? If you’re considering either or both domiciles for your ETF range, what are the recent changes that will affect your decision, and future changes we might see? I am really excited to be joined today by experts from both countries. First is Shany Venon, Head of Institutional Investors Client Line fromour Luxembourg office. Shany, can you tell us a bit about your background?
Shany Venon: Thank you for having me today, I’m really pleased to be here and to talk about the importance of ETFs and Luxembourg.
So just to give you a bit of background, I started my journey at Securities Services 25 years ago, in Luxembourg, before moving to our headquarters in Paris. Over the years, I’ve held various roles, ranging from product development to business development, always with a focus on the global fund and asset managers industry. In late 2021 I returned to Luxembourg where I now lead the client lines. My role is essentially to ensure we deliver the right products to the market to support sustainable business growth.
Jeff: Thanks, Shany. I have worked with Shany for many years and I am always impressed by the wide range of your knowledge and experience. Speaking of impressive, we also have another fantastic guest with us today, Ian Keller, EMEA Fund Solutions Manager, from our Dublin Office. Ian can you tell us a bit about yourself?
Ian Kelleher: Sure Jeff, and thank you for the introduction. It’s obviously not very so easy to follow Shany. Maybe I should have gone first on this podcast, but I’ll give it a go!
As you said Jeff, I am based in our Dublin office, and I have been with BNP Paribas for just over 10 years now. I started off in our Fund Administration department, primarily working with our alternatives clients. From there I moved into our Business Implementation team, and that was a really fantastic experience as it provided a broad exposure to a lot of the core securities services activities. This led me then to focus on more of a product role, and that’s where I am now supporting our clients within the Asset Owner and Asset Manager Client Line. This includes a number of ETF managers so I’m really excited to be here today to talk about ETFs.
Jeff: Thank you Ian, I love the energy, which is a good transition because there is so much energy around ETFs in Europe today. With Ireland being the largest domicile and Luxembourg having strong momentum as the second largest domicile[1]. Ian, can you give the audience some background on how Ireland got to this point?
Ian: Absolutely Jeff, it’s great to get the opportunity to speak about an Irish success story on the global stage.
As you know, the global ETF market has seen tremendous growth in recent years with record numbers of inflows and AUM. Europe has played a key role in driving this growth with AUM now standing at over USD 2.1tn, and remarkably Ireland-domiciled ETFs account for over 70% of these assets[2].
So, in terms of your question, if I was to list some of the main factors that have contributed to this position, I would say: firstly, a strong regulatory framework. The Central Bank of Ireland (CBI) is the regulator of investment funds in Ireland, and it would be very well regarded globally in terms of investor protection.
Secondly, I would make reference to the ease of cross-border distribution. The UCITS passport which a lot of our listeners would be familiar with, allows a fund authorised in Ireland to be distributed in other EU member states without the need for any additional authorisation in these other jurisdictions.
Thirdly, I would say the knowledge and expertise within the ETF ecosystem in Ireland. By that I mean the law firms, the advisers, ManCos, custodians, administrators. There really is a strong support network for managers looking to enter the Irish market.
One additional key factor that I guess has cemented Ireland’s position at the head of the European ETF market is the competitive advantage that we have gained through the double tax treaty that Ireland has with the United States. This means that withholding tax on US equity income is only 15% for ETFs domiciled in Ireland versus a standard 30% in other European domiciles. So, if we were to take an S&P 500 ETF as an example. For every 1% of dividend yield on the S&P 500, an Irish ETF will benefit from an annual tax saving of 15 basis points. Given US equity-based ETFs remain a major strategic focus for investment managers, you can see why Ireland continues to attract such large ETF inflows.
Jeff: Well said Ian. So Shany, can you elaborate on the Luxembourg market and why you think it has such strong momentum?
Shany : Yes of course, Ireland has predominance in the ETF market in Europe today, but Luxembourg has really become a major player over time. As of June 2024, and according to Lipper Alpha Insight[3], Luxembourg held over 300 billion of Assets, that’s about 18% of the European ETF market share. In terms of funds, there were 1 440 EU domiciled ETFs listed on the Luxembourg Stock Exchange[4], reflecting the country’s robust infrastructure and appeal as a fund domicile.
But what’s really interesting is how Luxembourg is positioning itself for the next wave of growth – especially in active ETFs. Recent regulatory changes are designed to offer more flexibility to managers, particularly those concerned about transparency and protecting proprietary strategies.
One stands out feature is Luxembourg’s support for ETF share class within existing mutual funds. It may sound technical, but this is a game changer as it lets asset managers offer both traditional mutual funds and ETF share classes under the same fund umbrella — giving them operational efficiency and quicker time to market that they need.
On top of that there are new tax incentives kicking in from 2025: active ETFs are now exempt from the annual subscription tax, which reduces their costs, obviously.
So overall, Luxembourg is clearly positioning itself not just as a follower, but as a driver of ETF innovation in Europe.
Jeff: Thank you Shany for mentioning active, because I believe this can be a shift in terms of which Asset Managers are looking for ETFs.
Shany, you are leading an initiative on hybrid funds inside BNP Paribas. One area that you are looking at is private assets being held inside of classic fund distribution vehicles. In the United States we have just seen a somewhat rocky launch of PRIV[5], which is an ETF holding a portion of the portfolio in private credit. A lot of people in the market are paying close attention to this as a litmus test for the industry. We have also seen the success of a CLO ETF.
Shany, given the attractiveness of Luxembourg for private capital, can you see the potential for these types of ETFs in the Luxembourg domicile in the Luxembourg domicile in the future?
Shany: Yes, so maybe let me just mention this democratisation of private asset trend that we have in Luxembourg at the moment. This is not a new trend, but this is a trend which is accelerating in the fund industry, meaning that we have private capital investment strategies that are now targeting a broader range of investors, such as private banking clients or wealth managers. This trend is supported by recent regulatory development such as the ELTIF in Europe, and financial centres such as Luxembourg are promoting them very strongly.
Retailisation of private assets – it’s really aiming to offer investors more opportunities for portfolio diversification while raising new capital to invest in non-listed companies, infrastructure, real estate, etc.
In order to address the distribution of private asset strategies to a larger scope of investors, specific investment fund products and structures are considered. So, portfolio of private assets investments along with traditional and more liquid assets to cope with liquidity requirements, the distribution of private capital investment strategies through open-ended investment fund vehicles, so those are really the two aspects we are seeing.
These arrangements differ from the standard operating models that we know, and it creates hybrid funds model using both features from both private assets and the traditional world.
We have several asset manager clients who are already engaged in this trend, or have planned to engage in it, and they are asset managers from both the traditional space and the private capital space. So definitely, wecan anticipate interest in bridging the liquidity and accessibility of ETFs with more illiquid asset classes like private capital. Of course, there are still technical, regulatory, and structural challenges to overcome — but Luxembourg, with its strong role in fund innovation and infrastructure, is well positioned to lead in this space.
Jeff: Those are great points Shany. If we shift gears, Ian, to look at what the CBI has on its roadmap for ETFs?
Ian: Yeah, sure Jeff, it’s actually very interesting Jeff because traditionally the CBI had displayed a strict adherence to ESMA ETF rules but we’re definitely seeing signs of a more flexible approach as the industry evolves.
A good example of this would be the recent changes that have been announced to the share class naming convention rules. Previously if a manager had an existing mutual fund and wanted to launch an ETF share class, then the registered name of the fund had to be changed to include “ETF” in the fund name. However, it is now acceptable to have the ETF identifier at the share class level, and this aligns with other jurisdictions such as Luxembourg.
Another key focus for the CBI has been the subject of transparency and the disclosure of portfolio holdings by ETF managers. Until now, it had been mandatory for managers operating an Irish-domiciled ETF to disclose their portfolio holdings on a daily basis. There has been a push from investment managers to relax this stance for active ETFs, in particular, with Luxembourg allowing a monthly disclosure. The CBI has engaged with the industry on this matter and as of April 2025, it has formally updated its UCITS Q&As to allow periodic disclosure of holdings under certain conditions. There is still a requirement to provide daily information to both authorized participants and Market Makers to facilitate arbitrage but that doesn’t necessarily mean full portfolio holdings. The full portfolio holdings disclosure is now only required on a quarterly basis. One key item to add here is that this rule applies to both active and passive products, so it’ll be very interesting to see how this plays out in the market in Ireland in the coming months.
And finally, I’d just like to highlight the recent ‘Dear Chair’ letter that was issued by the CBI[6]. So, they held a review last year of the primary and secondary market trading arrangements of Irish ETFs. So, the review highlighted a couple of points and really focused on the inadequate due diligence and ongoing monitoring by the ManCos of their authorized participants and their market makers and similarly, it noted a lack of oversight at Board level. These are going to be areas that the CBI will expect to see addressed in 2025 in order to enhance the risk framework of the ETFs that are authorized in Ireland.
Jeff: Well said Ian and from my perspective as a non-EU resident, this is where BNP Paribas can help provide guidance and expertise on how to navigate the market landscape. Shany, can you explain how we can help a client launch an ETF?
Shany: Sure, so we have a strong base of asset managers with well-established funds and strong distribution networks already. More and more, they want to engage in a conversation with us to understand how the ETF market is working and what maybe are the key areas they should look at. So typically they would come to us with some questions where we are happy to engage with them. For example, they would ask what’s the difference between an active ETF and a traditional fund? They would ask: what are the regulatory requirements to launch an active ETF? How does liquidity work in an ETF, or what’s the role of a market maker?
That’s the type of question they would ask us. Sometimes, they would want to understand a bit more about how to distribute an ETF and how they would target investors, or what are the challenges they would be having. So those are the areas where we do not always have the answer, but we are happy to share with them what we see, what we heard, and when we have the answers from our Global Markets colleagues. So that’s the learning curve we are going through with our clients, who are well-established active managers.
Jeff: Thanks, Shany and those questions the clients are asking you are topics we are going to be speaking about in our future episodes. So it’s a great plug for our podcast. Ian, can you give a recent example of how we have helped a client launch an ETF in Ireland?
Ian: Sure, Jeff. I would like to echo, though, what Shany said in her piece there because in Ireland, we are seeing the same questions being raised by our clients. We’re seeing new entrants to the ETF space, so your traditional asset managers are really looking for a steer as to how to launch an ETF.
To your question Jeff about how we have helped our clients in Ireland with the launch of an ETF: in the last couple of years, we have worked very closely with a large asset manager already operating a UCITS fund range in Ireland. They wanted to introduce ETFs as part of their broader product offering and decided to launch a number of ETF sub-funds within an existing UCITS umbrella. Now the ETF space was new to our client, so it was really important that we were able to guide and support them through the nuances of operating an ETF.
So we were initially able to connect them with the ecosystem in Ireland, which I referenced previously, and that was really important because all stakeholders with an ETF launch need to work very closely together. In addition, we launched them through the ICSD share issuance model in Ireland, which is probably the main difference to mutual funds from an asset servicing perspective. We were also able to leverage our integrated bank model with our colleagues in BNP Paribas Global Markets acting as swap counterparty, authorized participant and market maker for the ETFs. The fact that we could provide such a coordinated end-to-end implementation was very well received by our client and they have gone from strength to strength with over 15 ETF sub-funds currently live within the umbrella, and more in the pipeline. So it’s really exciting for them, and really exciting for BNP Paribas in Ireland
Jeff: I think you both eloquently stated how BNP Paribas can help our clients with ETFs, I really appreciate you both taking the time to come here today.
Shany and Ian: Thanks Jeff.
Jeff: Excellent. Watch this space for more episodes, where we will be getting into more detail on how and where to operate your ETF and bring on some more exciting guests. Thank you.
[1] European ETF Listing and Distribution 2024
[2] https://www.irishfunds.ie/news-knowledge/newsletter/industry-insights-entering-the-european-etf-space/
[3] Global ETF Industry Review: June 2024 | Lipper Alpha Insight | LSEG
[4] Luxembourg Stock Exchange and EuroNext figures combined due to Luxembourg trades being generated through the Euronext platform: European ETF Listing and Distribution 2024
[5] State Street Private-Debt ETF Scores No New Flows in Weeks – Bloomberg
[6] An Examination of the Primary and Secondary Market Trading Arrangements of Exchange Traded Funds (‘ETFs’) in Ireland
