Nearly a decade after arriving in Europe’s exchange-traded fund market, Vanguard Group doesn’t have to look far for reminders of just how tough it can be.

The U.S. investing giant’s first European ETFs turned eight last month, but the firm’s performance in the region will surely have put a damper on any celebration. Vanguard products bled more than 600 million euros ($670 million) in May, their first losing month in 10 and the worst since 2018.

Compare that with the American market, where the Pennsylvania-based firm trounced all competitors, spurring talk it could even overtake BlackRock Inc. to become the largest asset manager globally.

It’s a disconnect that perfectly illustrates the challenges facing even the biggest names trying to crack the world’s second-largest ETF market, and one of its fastest-growing.

Vanguard’s retail-friendly message has won it a loyal following among small investors in the U.S., who have plowed about $1.1 trillion into its funds. But the same philosophy has so far fizzled in Europe, where the firm has less than 6% of the market compared with first-placed BlackRock’s 45% share. In America the figures are more like 27% and 38%, respectively.

Arguably the biggest problem facing the $6.2 trillion behemoth is that the European financial landscape is dominated not by moms and pops but by institutions. This means issuers with long-standing distribution strategies directed toward these players have thrived -- while retail investor-oriented outfits like Vanguard have struggled.

Since its 2012 arrival the firm has collected around 47 billion euros into its Europe-listed ETFs, leaving it in sixth place in the $1 trillion market. That puts it behind not only global leader BlackRock but also homegrown players DWS Group, Lyxor Asset Management, UBS Group AG and Amundi SA.

Still, the John Bogle-founded firm has no plans to abandon its long-standing philosophy, according to Thomas Merz, head of distribution for continental Europe.

“We didn’t adjust to the European market, we didn’t have hundreds of different ETFs slicing and dicing the market in a narrow way as often is the case for Europe with other ETF providers,” he said. “We haven’t changed our Vanguard approach.”

There have been glimpses the strategy could yet prevail. Overall inflows for the year remain solid at 3.6 billion euros, with the firm performing especially well during the height of the coronavirus crisis in March. It lured 1.8 billion euros that month, while virtually all of its competitors saw outflows.

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