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3 Ways To Own European Small-Cap ETFs

David Fabian

Quantitative easing efforts by the European Central Bank have been a tailwind for exchange-traded funds that track European stocks.

While most investors may be swayed towards traditional large-cap offerings such as the Vanguard Europe ETF (NYSE: VGK), the real momentum has been in the small cap segment.

The WisdomTree Europe SmallCap Dividend Fund (NYSE: DFE) has over $1 billion in assets dedicated to 340 small and mid-cap companies spread throughout Europe.

The most interesting facet of this ETF is that the underlying holdings are dividend weighted according to their annual cash distributions paid to shareholders.

The end result is heavy country exposure in the United Kingdom and Sweden, which geographically make up nearly 48 percent of the underlying stocks.

DFE charges a net expense ratio of 0.58 percent and pays quarterly distributions to shareholders.

Since the beginning of the year, DFE has managed to gain nearly 19 percent in total return and is currently sitting near multi-year highs.

This is almost double the 10 percent gain that VGK has experienced over the same time frame.


While DFE is considered a smart beta index through its fundamental screening criteria, a more traditional market-cap weighted way to play this theme is through the iShares MSCI Europe Small-Cap ETF (NASDAQ: IEUS).

Related Link: Utility ETFs Face Difficult Interest Rate Environment

IEUS provides exposure to nearly 900 stocks throughout developed European nations. This ETF also has the bulk of its company exposure in the United Kingdom, with Germany and Switzerland rounding out the top three.

IEUS charges an expense ratio of 0.40 percent and currently has $41 million in total assets. So far this year, IEUS has gained 17 percent and continues to exhibit strong relative performance within its peer group.

Lastly, the SPDR EURO STOXX Small Cap ETF (NYSE: SMEZ) is the latest small-cap Europe fund to make its debut just last year. This ETF follows a basket of 98 stocks that are primarily centered in France, Germany, and Italy.

SMEZ is a variant way to access European stocks with a far different makeup than either DFE or IEUS. This fund may offer a competitive advantage in setting itself apart from its peers.

Overall, these three ETFs offer liquid and diversified access to international markets in a strong uptrend.

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