If you are looking for a simple way to invest stocks and shares across the world, a global ETF is a simple solution. These ETFs invest in the largest companies on the world’s major markets.
This could act as a one-stop investment solution. Here is the lowdown on five of the best UK-listed global ETFs.
SPDR MSCI ACWI UCITS ETF (GBP) | ACWI
This ETF is in the Elston Top Fifty list of ETFs and won the 2019 award in the global equity exposure category.
The ETF tracks the MSCI ACWI index which comprises more than 2700 stocks across 23 developed markets and 26 emerging markets. Here are the top countries, sectors and companies for the index:
Top sectors in MSCI ACWI index
Sector
% of index
Financials
16.9
IT
16.0
Health
11.4
Consumer Discretionary
10.8
Industrials
10.5
Top countries
Country
% of index
US
55.3
Japan
7.1
UK
5.0
China
3.7
France
3.4
Top companies
Company
% of index
Microsoft
2.1
Apple
2.0
Amazon
1.7
Facebook ‘A’
1.0
Johnson & Johnson
0.8
Source: MSCI, June 28 2019
You can see from the above tables that the index, and therefore the ETF, have a large weighting towards the US (55%). So this ‘global’ ETF might not be as diverse as you expected.
On the other hand, this weighting reflects the fact that the US market is by far the largest in the world and it’s a market that has performed very well over the last decade. Of course, that may reverse if you think US valuations are too high.
You could always diversify your portfolio a bit more by investing some money in one or two regional ETFs such as Europe on top of your global ETF.
This SPDR ETF has about $1.6 bn under management and an ongoing charge of 0.4% a year – reasonable without being cheap. It’s a physical ETF with optimised sampling. This means it buys shares in companies in the underlying index but it doesn’t buy shares in all 2700 constituents.
The ETF has two strengths: it tracks a broad index, and it tracks that index very efficiently. In other words, the value of the ETF usually moves closely in line with the index. That’s why it won the award from Elston, and it’s also why I’m happy to put this fund at the top of this article.
Invesco MSCI World UCITS ETF (GBP) | MXWS
This is another award-winning ETF in the Elston Top 50. The Invesco MSCI World ETF tracks the MSCI World index which is comprised of 1655 stocks in the 23 countries. There are no emerging market stocks in the index – all 23 countries are developed markets.
The stocks include large-cap and mid-cap companies and represent around 85% of the various markets by value.
Here are the top countries, sectors and stocks in the index:
Top sectors
Sector
% of index
IT
16.3
Financials
15.8
Health
12.6
Industrials
11.2
Consumer Discretionary
10.5
Top countries
Country
% of index
US
62.7
Japan
8.0
UK
5.7
France
3.9
Canada
3.5
Company
% of index
Microsoft
2.4
Apple
2.3
Amazon
1.9
Facebook ‘A’
1.1
Johnson & Johnson
0.9
Source: MSCI, June 28 2019
With emerging markets stocks taken out of the index, it’s no surprise that the US weighting is even larger, comprising 62% of the index.
The Invesco MSCI World ETF has a low 0.19% ongoing charge and around $870 million under management. It’s a synthetic ETF which means it doesn’t invest in the underlying stocks. Instead it uses derivatives to mirror the performance of the MSCI World index, and it does that very efficiently – hence the Elston Top 50 award.
Lyxor DJ Global Titans 50 UCITS ETF Dist (GBP) | MGTL
This ETF tracks a narrower index, the DJ Global Titans 50. This index comprises just 55 stocks across 11 countries, so you’re only getting exposure to the world’s largest mega-cap stocks. Focusing purely on mega-caps may mean the performance is a little less volatile than for an ETF tracking a broader index.
Because the index is narrower, the weighting towards the US is even larger, comprising 76% of the index. The UK is in second place with 6.8%. As for sectors, the index offers plenty of exposure to technology; tech shares comprise 35% of the index.
The Lyxor ETF has a reasonable charge of 0.4% a year, and is pretty good at tracking the index. Trackinsight gives the ETF a five-star rating for that reason. It’s a synthetic fund.
If you only want to invest in the very largest companies, this is the ETF to go for.
Xtrackers FTSE All-World ex UK UCITS ETF 1C | XDEX
It’s tempting for investors to stick with the familiar and over-invest in their home market. If you’re based in the UK and your portfolio is too focused on the London market, this Xtrackers ETF might be the one for you. That’s because it gives you global exposure but doesn’t include any stocks listed in London.
It tracks the FTSE All World ex UK Net Total Return Index which is a broad index made up of around 3800 constituents. US stocks have a 57% weighting in the index with Japan in second place on 8.1%.
The ETF is fairly small with just £37 million under management. That means there’s a chance the fund might be shut down at some point – it probably needs to grow to become commercially worthwhile for Xtrackers. The ongoing charge is 0.4% and the ETF is physical. Tracking has been fairly efficient since the ETF was launched in 2015.
iShares Edge MSCI World Size Factor | IWFS
This ETF is tilted more to mid-cap stocks than the other ETFs in this list. It tracks the MSCI World Mid Cap Equal Weighted index. Equal weighting is a crucial part of the index, and it means you get more exposure to the smaller stocks in the index.
Every six months the index is ‘rebalanced’ so that all stocks comprise exactly the same share of the index. Share price movements mean that weightings then change over the next six months until the next rebalancing happens.
Here are the top countries and sectors for the index:
Top countries
Country
% of index
US
37.1
Japan
20.4
UK
6.8
France
5.1
Canada
4.9
Top sectors
Sector
% of index
Industrials
18.3
Consumer Discretionary
14.0
Financials
13.0
IT
10.5
Materials
9.9
Source: MSCI, June 28. 2019
The striking point is that exposure to the US is much lower than for the other ETFs in this article. So there’s an opportunity for some healthy diversification here – both in terms of size and geography. The charge is 0.3% and it’s a physical ETF.
The Elston Top 50 list of ETFs is unveiled
An honourable mention
Before we finish, I’d like to give a quick mention to the L&G Global Equity UCITS ETF (GBP) | LGGG. The ETF was only launched in February so there’s not much of a track record to look at, but the ETF is nice and cheap with a 0.1% charge.
