ETFs for U.K. Exposure as British Stocks Hit 14-Year High

ETF Trends

United Kingdom equities are hovering around their highest level in a little over 14 years. While there are no U.S.-listed exchange traded funds that track the FTSE 100 Index, there are a number of ETFs that follow U.K. stocks.

The FTSE 100 Index closed at 6,865.86 Monday, its highest level since December 1999, as Dixons Retail (DXNS) rose 6.7% on merger talks with Carphone Warehouse Group (CPW), and Bunzl Plc climbed 6.9% on a strong full-year revenue posting, reports Inyoung Hwang for Bloomberg.

“European markets are focused on the macroeconomic picture within Europe,” Louis de Fels, a fund manager at Raymond James Financial Inc., said in the article. “People want to buy domestically oriented stocks. You have money inflows and better economic data. The two combined help the market further, but we are not out of the woods yet. There will still be volatility in the markets.”

The FTSE 100 Index rose 0.4% Monday and is up 2.3% year-to-date.

ETF investors interested in the U.K. can take a look at the iShares MSCI United Kingdom ETF (EWU) , the largest ETF to track the United Kingdom. The fund tracks an MSCI index and tilts toward large- and mega-cap names, which make up 68.1% and 23.5% of the portfolio, respectively. Top holdings include HSBC Holdings 6.8%, Vodafone Group 6.4% and BP Plc 5.3%. EWU is up 1.7% year-to-date.

BlackRock’s iShares also provides a small-cap U.K. offering, the iShares MSCI United Kingdom Small-Cap ETF (EWUS) , which includes 74.5% in mid-caps and 25% in small-caps. Holdings are more equally weighted with its largest component weight ASOS Plc at 1.8% of the portfolio. The ETF is up 4.9% year-to-date. [Small-Cap Royalty With This ETF]

Alternatively, the First Trust United Kingdom AlphaDEX Fund (FKU) provides a smart-beta play on U.K. stocks as the underlying index selects components based on factors like book value to price, cash flow to price and return on assets. The ETF also takes a greater tilt toward mid-cap stocks at 64.4% of the portfolio and spreads out component allocations, with its largest weight in Capital & Counties Properites at 2.5%. FKU has gained 4.9% so far this year.

Additionally, if you are worried about a depreciating British pound sterling, investors can gain exposure to the U.K. and hedge against the weaker currency with ETF options like WisdomTree United Kingdom Hedged Equity Fund (DXPS) and db X-trackers MSCI United Kingdom Hedged Equity Fund (DBUK) , which are up 0.7% and up 0.2% year-to-date, respectively. [U.K. ETF Finds Support As BOE Holds Stands Pat]

For more information on the U.K., visit our United Kingdom category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Rates

View Comments (0)