Gaining exposure to the global equities market is in itself a daunting task, but with the evolution of the ETF industry, investors can now gain cheap and easy access to nearly every corner of the investable universe through a single ticker. And as these global equity ETFs become more and more popular, issuers are taking it one step further, providing true international exposure without featuring any allocations to domestic securities. The global ex-U.S. strategy is a popular one; investors can add a broad layer of diversification benefits to their portfolios, as international equities can often provide uncorrelated returns to domestic markets . Investors can now choose from dozens of global ex-U.S. options, including funds that target a particular sector of the international market or those that cast a wider net over the whole space. And though these broad-based funds do feature deep and relatively well-diversified portfolios, a closer look under the hood of some of the more popular products reveals several factors investors should be mindful of.

A Closer Look At Global Ex-U.S. ETFs

While many of the broad-based ETFs do a relatively good job of providing investors with diversified exposure to the international equities market, there are some rather significant differences found among the most popular global ex-U.S. ETFs. First,the interpretation by each issuer of what exactly is the global market portfolio; compositions range from a basket of 450 individual holdings to over 6,000. There is, however, a common theme when it comes to allocations to particular sectors and countries; many of these ETFs feature heavy tilts towards the financial services sector and equities from the United Kingdom .

The chart below highlights five of the most popular global ex-U.S. ETFs, revealing the differences between the portfolio sizes and allocations to financials and U.K. equities:

  • FTSE All World Ex US ETF
  • MSCI ACWI ex US Index Fund
  • Total International Stock ETF
  • SPDR S&P World ex-US ETF
  • FTSE All-World ex-US Small Cap Index ETF

Though the size of a portfolio does not necessarily dictate the performance of a specific ETF, it is important for investors to realize the differences in the number of holdings in these broad-based products. And while heavy allocations to a specific sector or country are not necessarily harmful, it does mean that the fund's performance will greatly depend on these two corners of the market.

Disclosure: No positions at time of writing.

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  5. Investing Basics

    Top Tips for Diversifying with Exotic Currencies

    Is there an opportunity in exotic currencies right now, or are you safer sticking to the major ones?
  6. Mutual Funds & ETFs

    The 3 Biggest Mutual Fund Companies in the US

    Compare and contrast the rise of America's big three institutional asset managers: BlackRock Funds, The Vanguard Group and State Street Global Advisors.
  7. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  8. Professionals

    5 Top-Rated Funds for Your Retirement Portfolio

    Mutual funds are a good choice for emotional investors. Here are five popular funds to consider.
  9. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  10. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  1. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  2. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  6. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!