By Iain Withers
LONDON (Reuters) -European investors have put more money into local stock index-trackers so far in 2025 than in any full-year on record, with demand for defence funds booming, data shows, as President Donald Trump's erratic trade policy hits their appetite for U.S. shares.
Investors had ploughed a net 39.4 billion euros ($46.2 billion) into European-focused Exchange Traded Funds (ETFs) domiciled in the region by the end of July - topping every full-year tally since 2008 when Morningstar
first collected the data.
The net inflows in 2025 are up more than three-fold on last year's total, helping power the region's ETF market to 2.4 trillion euros in assets, according to Morningstar.
In contrast, U.S.-focused ETFs have attracted 12.5 billion euros of net new money this year, down 40% on the same period in 2024 and the lowest tally for the period in three years.
The trend towards picking local stocks has been visible across the biggest investment houses. U.S. investment giant BlackRock, the largest ETF provider, France's Amundi, Deutsche Bank's DWS and Switzerland's UBS have all seen strong local inflows, the Morningstar data shows.
While U.S. stocks have rebounded to record highs after an initial sell-off following Trump's 'Liberation Day' trade tariffs on April 2, net inflows into European-focused ETFs have topped U.S.-focused funds every month this year except in January, according to the data.
Global equity funds have also gained ground this year, with net inflows into European-domiciled products up 40% to 47.3 billion euros, while UK-focused ETFs have continued to struggle, suffering 1.2 billion euros of net outflows after a small inflow last year.
Investors in the region have also backed defence-themed ETFs in huge numbers, as European countries race to rebuild their militaries. Europe-based security ETFs have pulled in 7.6 billion euros of net inflows so far this year, Morningstar said, more than three times the next biggest ETF category, artificial intelligence.
Monika Calay, an analyst at Morningstar, said that unpredictable trade policy under President Trump had cooled European investors' appetite for U.S. funds, but added that they remained a big part of most portfolios.
($1 = 0.8535 euros)
(Reporting by Iain Withers; additional reporting by Suzanne McGee in New York; Editing by Tommy Reggiori Wilkes, Kirsten Donovan)
