Europe is home to some of the biggest and best-known companies in the world, including Nestlé SA (NESN), Volkswagen AG (VOW3), and SAP SE (SAP). Investors looking for broad exposure to the European market may consider buying exchange-traded funds (ETFs).
Europe-focused ETFs provide diverse exposure to companies in this market, helping to mitigate the risk often associated with investing in individual stocks.
- The European stock market has underperformed the U.S. equities market in the past year.
- The Europe exchange-traded funds (ETFs) with the best one-year trailing total returns are EWO, DFE, and EWUS.
- The top holdings of these ETFs are Erste Group Bank AG, Ferrexpo PLC, and Rightmove PLC, respectively.
There are 38 Europe ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). European equities, as measured by the MSCI Europe Index, have underperformed the U.S. stock market over the past 12 months, with a total return of 32.5% compared to the S&P 500’s total return of 35.2%, as of Aug. 2, 2021. The best-performing Europe ETF, based on performance over the past year, is the iShares MSCI Austria ETF (EWO).
We examine the three best Europe ETFs below. All numbers are as of Aug. 2, 2021.
- Performance Over One-Year: 68.4%
- Expense Ratio: 0.51%
- Annual Dividend Yield: 1.76%
- Three-Month Average Daily Volume: 37,157
- Assets Under Management: $82.1 million
- Inception Date: March 12, 1996
- Issuer: BlackRock Financial Management
EWO tracks the MSCI Austria IMI 25/50 Index, which is designed to measure the performance of a broad range of companies trading on the Austrian market. The ETF provides broad-based exposure to the Austrian economy, but it is heavily tilted toward financials, materials, industrials, energy, and utilities.
The fund targets value stocks and is probably the best option for investors looking for specific exposure to the Austrian market. Its top three holdings are Erste Group Bank AG (EBS:VI), a financial services provider; OMV AG (OMV:VI), an integrated oil, gas, and petrochemical company; and class A shares of VERBUND AG (VER:VI), an electricity provider.
- Performance Over One-Year: 51.7%
- Expense Ratio: 0.58%
- Annual Dividend Yield: 2.40%
- Three-Month Average Daily Volume: 14,454
- Assets Under Management: $352.9 million
- Inception Date: June 16, 2006
- Issuer: WisdomTree
DFE tracks the WisdomTree Europe SmallCap Dividend Index, an index representing small-cap companies from within the European dividend-paying space. Companies in the index represent the lowest 25% of the market capitalization of the WisdomTree Europe Dividend Index, excluding the 300 largest companies. Holdings are weighted based on annual dividends paid.
The top holdings of DFE include Ferrexpo PLC (FXPO:LON), a Switzerland-based commodity trading and mining company; ChemoMetec A/S (CHEMM:CO), a Denmark-based maker of analytical instruments; and Jupiter Fund Management PLC (JUP:LON), a U.K.-based fund management group.
- Performance Over One-Year: 49.3%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 1.33%
- Three-Month Average Daily Volume: 19,889
- Assets Under Management: $125.2 million
- Inception Date: Jan. 25, 2012
- Issuer: BlackRock Financial Management
EWUS tracks the MSCI United Kingdom Small Cap Index, which gauges the performance of small-cap equities whose market caps represent the bottom 14% of the U.K. securities market. The ETF provides exposure to small, publicly traded companies based in the United Kingdom, making it an effective pure play on the U.K. economy. The sectors receiving the largest allocation in the fund include industrials, consumer discretionary, and financials.
The fund’s top three holdings are Rightmove PLC (RMV:LON), an online real estate portal provider; Intermediate Capital Group PLC (ICP:LON), a global alternative asset management company; and DS Smith PLC (SMDS:LON), a multinational packaging company.
The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.