As one of the largest economies in the world, the U.K. is a major focus of interest for many investors. The nation's outlook today is clouded by the COVID-19 pandemic, including fast spreading strains of the virus, and by the economic fallout related to Brexit and other geopolitical tensions. Given these forces, investors may wish to utilize an exchange-traded fund (ETF) focused on the U.K in order to easily access a diversified portfolio of U.K. securities while reducing the risk associated with purchasing individual stocks. Over the past year, the U.K. stock market has significantly underperformed the broader U.S. stock market, with the benchmark MSCI United Kingdom Index providing a 1-year trailing total return of 10.6% compared with 34.4% for the S&P 500 as of March 1.
- The U.K. stock market has significantly underperformed the broader U.S. market over the past year.
- The U.K. ETFs with the best 1-year trailing total return are EWUS, FKU, and ZGBR.
- The top holdings of these ETFs are Rightmove PLC, Royal Mail PLC, and Unilever PLC, respectively.
There are 5 U.K. ETFs that trade in the U.S., excluding leveraged and inverse funds. The best U.K. ETF, based on 1-year performance, is the iShares MSCI United Kingdom Small-Cap ETF (EWUS). Below, we'll look at the top 3 U.K. ETFs as measured by 1-year trailing total returns. All data aside from benchmark performance above are as of March 2, 2021.
ETFs with very low assets under management (AUM), less than $50 million, usually have lower liquidity than larger ETFs. This can result in higher trading costs which can negate some of your investment gains or increase your losses.
- 1-Year Trailing Total Return: 22.0%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 1.87%
- 3-Month Average Daily Volume: 29,987
- Assets Under Management: $93.0 million
- Inception Date: January 25, 2012
- Issuer: iShares
EWUS is a value-focused ETF that targets the MSCI United Kingdom Small Cap Index. This index is comprised of stocks with market capitalizations representing the bottom 14% of the British securities market and primarily includes companies from the industrial, financial, and consumer discretionary sectors. EWUS holds roughly 258 stocks, with invested assets distributed evenly across these holdings. The top EWUS holdings include Rightmove PLC (RMV:LON), a manager of a real estate portal and website; Intermediate Capital Group PLC (ICP:LON), a global alternative asset manager; and B&M European Value Retail SA (BME:LON), a variety store chain.
- 1-Year Trailing Total Return: 20.4%
- Expense Ratio: 0.80%
- Annual Dividend Yield: 1.40%
- 3-Month Average Daily Volume: 3,828
- Assets Under Management: $19.9 million
- Inception Date: February 14, 2012
- Issuer: First Trust
FKU is a multi-cap value fund targeting the NASDAQ AlphaDEX United Kingdom Index. The index holds stocks from the NASDAQ United Kingdom Index that have been identified based on value and growth factors according to a ranking methodology. The fund holds about 76 stocks, with the top 10 holdings accounting for just under a quarter of assets. The top holdings of FKU include Royal Mail PLC (RMG:LON), a postal service and courier company; Glencore PLC (GLEN:LON), a U.K.- and Switzerland-based commodities trading and mining company; and Evraz PLC (EVR:LON), a steel production and mining company.
- 1-Year Trailing Total Return: 10.3%
- Expense Ratio: 0.14%
- Annual Dividend Yield: 2.69%
- 3-Month Average Daily Volume: 3,461
- Assets Under Management: $14.2 million
- Inception Date: June 11, 2014
- Issuer: State Street SPDR
ZGBR is a blended fund that targets the Solactive GBS United Kingdom Large & Mid Cap USD Index NTR. The index is a free float-adjusted market capitalization-weighted index including large- and mid-cap companies in the U.K. market. The index offers broad exposure to common and preferred stock, REITs, DRs, and other products. ZGBR holds about 107 names, with the top 10 positions accounting for about roughly 40% of assets. The fund's top holdings are Unilever PLC (ULVR:LON), a multinational consumer goods company; AstraZeneca PLC (AZN:LON), a biopharmaceutical company; and HSBC Holdings PLC (HSBA:LON), a banking and financial services company.
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