European ETFs have kicked off 2026 with their strongest month on record, as investors rotated back into equities and rebuilt risk exposure after a volatile end to last year.
UCITS ETFs attracted €47.8bn of net inflows in January, the highest monthly total since records began in 2015, according to BNP Paribas Asset Management’s latest ETF Watch report.
Equity ETFs dominated flows, pulling in €36.8bn, while fixed income ETFs gathered €11.1bn, underlining renewed confidence in risk assets as markets entered the new year.
Global equity ETFs accounted for the largest share of inflows, attracting €16.4bn during the month. European equity ETFs followed closely with €7.8bn, while emerging market equities drew €7.3bn, marking a notable shift away from the US-dominated flows seen through much of 2024 and early 2025.
US equity ETFs still attracted fresh money, but at a more modest €4.7bn, suggesting investors are becoming more selective on US exposure as valuations remain elevated.
By contrast, China-focused equity ETFs continued to see net outflows, reflecting persistent investor caution despite strong performance in parts of the emerging markets complex
Fixed income ETFs continued to attract steady inflows, with €11.1bn added in January. Government bond ETFs led the way, taking in €4.7bn, primarily across global and emerging market exposures.
Ultrashort bond ETFs also saw strong demand, gathering €2.6bn, as investors balanced yield opportunities against lingering uncertainty around the pace and timing of future rate cuts.
European fixed income ETFs attracted €3.2bn, accounting for more than half of the region’s fixed income flows, highlighting continued home bias among European investors.
Active ETFs extended their growth momentum, attracting €3.3bn in net inflows during January. Equity strategies accounted for the bulk of demand, with €2.0bn of inflows, followed by fixed income active ETFs with €1.2bn.
Although active ETFs still represent a small share of total ETF assets, they captured 6.8% of total UCITS ETF inflows during the month, underlining growing acceptance among institutional investors and wealth managers.
Market performance provided a supportive backdrop for ETF demand. European equities outperformed in January, with the Stoxx Europe 600 rising 3.2%, while emerging markets gained 8.9%, significantly ahead of the US market’s 1.3% return.
Japan also delivered strong gains, with the Nikkei 225 up 5.9%, reinforcing investor appetite for diversification beyond the US mega-cap trade.
Asset allocation implications
The scale and breadth of January’s ETF inflows suggest investors are entering 2026 with a more constructive outlook, rebuilding equity exposure while maintaining diversified fixed income allocations.
For multi-asset managers, the data points to renewed confidence in global and regional equity allocations, alongside continued use of ETFs as efficient tools for tactical positioning and risk management.
Whether the strong start to the year proves sustainable will depend on inflation data, central bank signalling and geopolitical developments, but January’s record flows indicate that investors are prepared to put capital back to work.