As one of the largest economies in the world, the UK is a prime area for investment. Although the region has been heavily impacted along with much of the rest of the world by the COVID-19 pandemic, and despite the fact that the UK is dealing with ongoing economic fallout related to Brexit and other geopolitical tensions, the area remains a key point of focus for many U.S. investors. These investors may wish to utilize an exchange-traded fund (ETF) focused on the UK in order to easily access a diversified portfolio of UK securities while simultaneously reducing the risk often associated with purchasing a smaller number of different stocks. Over the past year, the UK stock market has significantly underperformed the American stock market, with the benchmark MSCI United Kingdom Index providing 1-year trailing total returns of -12.7% as compared with 14.3% for the S&P 500 as of September 10.
- The UK market has significantly underperformed the broader market over the past year.
- The 3 UK ETFs currently available are EWUS, FLGB, and EWU.
- The top holdings of these ETFs are Rightmove PLC, AstraZeneca PLC, and AstraZeneca, respectively.
There are just 3 UK ETFs that trade in U.S. markets, excluding leveraged and inverse funds as well as those with under $50 million in assets under management (AUM). The best UK ETF for Q4 is the iShares MSCI United Kingdom Small-Cap ETF (EWUS). Below, we'll look at the 3 UK ETFs, ranked according to their 1-year trailing total returns. Note that all of the UK ETFs have negative total returns over the period in question. All data aside from benchmark performance above are as of Sept. 12, 2020.
- 1-Year Trailing Total Return: -7.8%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 3.01%
- 3-Month Average Daily Volume: 12,208
- Assets Under Management: $53.9 million
- Inception Date: January 25, 2012
- Issuer: iShares
EWUS is a value-focused ETF which 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 270 stocks, with invested assets distributed quite evenly across these holdings. The top EWUS holdings include Rightmove PLC (RMV), a manager of a real estate portal and website; Pennon Group PLC (PNN), a water utility and waste management company; and B&M European Value Retail SA (BMRPF), a variety goods value retailer.
- 1-Year Trailing Total Return: -12.6%
- Expense Ratio: 0.09%
- Annual Dividend Yield: 4.47%
- 3-Month Average Daily Volume: 11,451
- Assets Under Management: $80.6 million
- Inception Date: November 2, 2017
- Issuer: Franklin Templeton Investments
FLGB is a large-cap blended fund which tracks the FTSE UK Capped Index. The index represents large- and mid-cap UK stocks and is market cap-weighted. FLGB holds about 131 holdings, with the top 15 accounting for roughly half of the fund's invested assets. The top holdings of FLGB include AstraZeneca PLC (AZN), a biopharmaceutical company; GlaxoSmithKline PLC (GSK), a pharmaceutical company; and HSBC Holdings PLC (HSBA), a banking and financial services company.
- 1-Year Trailing Total Return: -14.3%
- Expense Ratio: 0.50%
- Annual Dividend Yield: 3.81%
- 3-Month Average Daily Volume: 3,286,240
- Assets Under Management: $2.1 billion
- Inception Date: March 12, 1996
- Issuer: iShares
Like EWUS above, EWU is a broad, blended fund which includes holdings representative of diverse sectors and industries within the UK market. The fund tracks the MSCI United Kingdom Index and is by far the largest (by AUM) and most liquid UK ETF available to U.S. investors. EWUS holds 87 securities, with 43.6% of invested assets concentrated in the top 10. The top holdings for EWUS include AstraZeneca, GlaxoSmithKline, and HSBC.