As one of the largest economies in the world, the U.K. has long been a major focus of American investors. The nation’s economy contracted sharply last year due to the disruption stemming from the COVID-19 pandemic. But the economy is beginning to recover as the vaccine rollout reaches more citizens. The U.K. Office for National Statistics reported that GDP grew 4.8% in the second quarter, although the pace slowed as COVID-19 cases spiked in July. Economists forecast GDP could expand 7% for the year. Investors looking to profit from these trends might consider a U.K. exchange-traded fund (ETF) that provides diversified exposure to a basket of U.K. equities.
The ETFs with the best 1-year trailing total return are FKU, EWUS, and EWU.
The top holdings of these ETFs are Future PLC, Meggit PLC, and AstraZeneca PLC, respectively.
There are 4 U.K. ETFs that trade in the U.S., excluding leveraged and inverse funds. The U.K. equity market, as measured by the MSCI U.K. Index, has underperformed the broader market with a total return of 27.4% over the past 12 months compared to the S&P 500’s total return of 33.5%, as of Aug. 17, 2021. The best-performing U.K. ETF for Q4 2021, based on performance over the past year, is the First Trust United Kingdom AlphaDEX Fund (FKU). We examine the top 3 best U.K. ETFs below. All numbers below are as of Aug. 17, 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.
Performance over 1-Year: 43.6%
Expense Ratio: 0.80%
Annual Dividend Yield: 2.04%
3-Month Average Daily Volume: 6,440
Assets Under Management: $29.3 million
Inception Date: Feb. 14, 2012
Issuer: First Trust
FKU tracks the NASDAQ AlphaDEX United Kingdom Index, which uses the AlphaDEX stock selection methodology to select stocks from the NASDAQ United Kingdom Index. The ETF provides exposure to U.K. equities of various market capitalizations. The sectors that receive the largest exposure in the fund are financials, industrials, and consumer discretionary. The fund’s top three holdings include Future PLC (FUTR:LON), a magazine publishing company; Tritax Big Box REIT PLC (BBOX:LON), a real estate investment trust investing in big box centers; and SEGRO PLC (SGRO:LON), a property investment and development company.
Performance over 1-Year: 42.5%
Expense Ratio: 0.59%
Annual Dividend Yield: 1.30%
3-Month Average Daily Volume: 17,002
Assets Under Management: $128.9 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 U.K., 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 include Meggit PLC (MGGT:LON), a maker of aerospace and defense products; Intermediate Capital Group PLC (ICP:LON), a global alternative asset management company; and Rightmove PLC (RMV:LON), the manager of an online real estate and property website.
Performance over 1-Year: 25.8%
Expense Ratio: 0.51%
Annual Dividend Yield: 2.70%
3-Month Average Daily Volume: 2,492,937
Assets Under Management: $3.6 billion
Inception Date: March 12, 1996
Issuer: BlackRock Financial Management
EWU tracks the MSCI United Kingdom Index, which measures the performance of the broader U.K. equity market. The ETF provides exposure to large and mid-sized U.K. companies. It’s a pure play on the U.K. economy. The fund follows a blended strategy, investing in a mix of both growth and value stocks. The fund’s largest sector allocations are in consumer staples, financials, and healthcare. The fund’s top three holdings include AstraZeneca PLC (AZN:LON), a British-Swedish multinational pharmaceutical and biotechnology company; Unilever PLC (ULVR:LON), a multinational consumer goods company; and Diageo PLC (DGE:LON), a multinational alcohol and beverage 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 to 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 on 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.