(News Bulletin 247) – The AMF, the financial markets watchdog, notes a growing interest among investors in ETFs, these listed funds which replicate an index, particularly among younger investors.

As for several quarters now, the Financial Markets Authority (AMF) notes in its “Dashboard of active individual investors”, a strong attraction of investors for listed index funds (ETFs).

For those who are not familiar with this financial term, these are funds which will replicate the evolution of the prices of a basket of stocks, bonds and raw materials. This is why they are also called “trackers”. Concretely, let’s take an ETF on the CAC 40. If the value of the CAC rises by 1%, your share in the ETF rises by 1%, if the CAC falls by 1%, the price of your share falls by 1%.

This explanation – which we hope was clear – will save you from having to “Google” this acronym which is also at the top of the financial terms most searched for on Google by Internet users, followed by IPO (“Initial Public Offering ” or simply an IPO) or broker (broker), according to CMC Markets.

A sign that this investment product has become more popular, the policeman of the Paris Stock Exchange noted a 4-fold increase in the number of French individual investors having carried out at least one ETF transaction in just five years, between the second quarter of 2019 and second quarter 2024.

This craze for ETFs is such that the policeman of the Paris Stock Exchange has decided to devote an in-depth study to this emerging trend.

The Stock Exchange with little wheels

In total, the Financial Markets Authority identified 266,300 French investors who made at least one purchase or sale of an ETF share in the second quarter of 2024. “This figure, twice as high as in the second quarter of 2023 , is largely explained by the significant influx of new investors over the last few quarters using ETFs”, explains the AMF

How to explain such success? Index funds have gained popularity in recent years, acclaimed for their simplicity, lower fees than other assets, a very wide choice of products and the possibility of saving with small amounts. Even with a small budget, for example 100 euros, it is possible to find ETFs to buy. And ETF management fees are very low.

A rejuvenation of investors

Above all, this simplicity and attractiveness of the product appeal to younger people, particularly with the development of trading platforms. “To democratize investment in the stock market, certain trading platforms have offers allowing the purchase of fractions of shares or ETF units, in particular through monthly investment programs,” describes the AMF.

This explains why 45% of active French investors aged between 25 and 35 bought or sold ETFs over the first six months of 2024, whereas they were only 11.7% in 2019. “They thus seem to be closer to the behavior of other European investors, who were already active on ETFs in 2019,” the study continues.

Thus, new French investors under the age of 35 have largely favored this trend, thus contributing to reducing the average age of ETF investors from 61.1 to 41.3 years between the second quarter of 2019 and the second quarter of 2024, also notes the AMF.

The study also highlights a fundamental change in the behavior of French investors during their first steps on the stock market. “In 2019, unlike other European investors, the first transaction consisted almost exclusively of buying stocks. In the first half of 2024, more than a third of investors under the age of 45 chose ETFs for their first transaction. This proportion then decreases with age,” says the Financial Markets Authority.

Limitless financial innovation

Remember that ETFs can replicate known indices, such as the CAC 40 and the S&P 500, but also offer exotic, even unusual investments, particularly in the United States.

Intelligent Alpha, for example, launched in September the ETF called Intelligent Omaha, an index fund based on models using Artificial Intelligence (AI) to try to replicate Warren Buffett’s very particular investment style.

It is also possible to invest in K-pop, with the KPOP ETF index fund, launched in September 2022 by CT Investement and which is listed in New York. It brings together around thirty values ​​linked to South Korean popular culture.

Financial innovation is therefore limitless and the range of investment vehicles offered by management companies to attract clients continues to expand, as evidenced in particular by the number of ETFs. In 2023, 543 new ETFs were launched, beating the previous record of 2021, when 480 new vehicles were registered, according to VettaFi.

And according to figures compiled by the ETFGI firm, the assets of listed index funds in Europe increased by almost 30% to reach a record level of 1,820 billion dollars at the end of 2023.