28 March 2023 | by Kianusch Cacace
What’s the most popular ETF in Europe? How much should you be paying for an ETF? Why is that mysterious UCITS tag really important? Level-up your knowledge with our ETF factoid blitz.
- Level: For beginners
- Reading time: 3 minutes
1. The ETF market is huge
Over eight trillion dollars are invested in ETFs worldwide. That’s more than the GDP of Germany and France combined. The US leads the way while Europe and Asia-Pacific battle it out for second place:
Regions | Equity ETF market size | Fixed income market size |
---|
Europe | $0.9T | $0.3T |
US | $5T | $1.2T |
Asia-Pacific | $0.8T | $0.1T |
Assets under management (AUM) in trillions of US dollars. Source: iShares, Dec 2022.
justETF note: Fixed income includes bonds and money market ETFs.
2. ETFs are dwarfed by the total investment market
ETFs are big business but they’re still a small (if growing) slice of the overall investment market:
Regions | ETF share of total equity market | ETF share of total fixed income market |
---|
Europe | 7.5% | 1.6% |
US | 12.6% | 2.5% |
Asia-Pacific | 3.9% | 0.3% |
These figures also show that claims that passive funds have grown so big they’re in danger of distorting the market are way off the mark.
3. Billions of dollars are traded in ETFs every day
$176.9 billion is traded in equity ETFs each day on average. Another $32 billion changes hands in fixed income ETFs. A grand total of $53.8 trillion in ETFs was bought and sold across 2022.
The scale of that trading activity helps explain why the best ETFs are so liquid and why we pay so little in bid-offer spreads.
Trading is measured as Average Daily Volume (ADV). Source: iShares, Dec 2022.
4. Europe’s most popular ETF asset classes
Growth potential helps explain why Europeans hold almost three times more wealth in equities than bonds. Commodities and money market ETF investments are miniscule in comparison:
Asset class | Market share |
---|
Equities | 71.2% |
Bonds | 24.5% |
Commodities | 2.6% |
Money Market | 1% |
Alternatives | 0.5% |
Other | 0.3% |
5. Top 5 most popular ETF equity categories in Europe
- US equity: €262.6 bn
- Global equity: €179 bn
- European equity: €61.9 bn
- Emerging markets equity: €56.9 bn
- Eurozone equity: €44.6 bn
After more than a decade of domination by US stocks, it’s not surprising that Europeans have more capital invested across the Atlantic than in the rest of the world. Can America keep it up or will the mean reversion phenomenon swing the advantage back towards global ETFs?
justETF note: Japan and the UK were in a photo finish for sixth and seventh place. Japan just edged it.
6. Top 10 most popular ETFs in Europe (by AUM)
- iShares Core MSCI World UCITS ETF USD (Acc)
- iShares Core MSCI EM IMI UCITS ETF USD (Acc)
- iShares Core FTSE 100 UCITS ETF GBP (Dist)
- iShares Core € Corp Bond UCITS ETF EUR (D)
- Vanguard FTSE All-World UCITS ETF USD (Dis)
- Xtrackers MSCI World UCITS ETF (1C)
Do you hold any of these? Europe’s ten largest ETFs account for 15.25% of the market between them.
7. Top 10 largest ETF providers in Europe
ETF provider | € bn | Total ETFs / ETCs |
---|
iShares (BlackRock) | 576 | 384 |
Amundi | 194 | 393 |
Xtrackers (DWS) | 132 | 214 |
Vanguard | 80 | 34 |
UBS | 78 | 413 |
Invesco | 60 | 137 |
SPDR (State Street) | 54 | 105 |
BNP Paribas | 26 | 108 |
WisdomTree | 22 | 182 |
HSBC | 17 | 51 |
AUM. Source: Bloomberg Intelligence, Dec 2022.
8. ETF fees continue to fall
The average ongoing fee for an ETF is now a mere 0.23%. You are doing well if your ETFs are even cheaper than that!
Yet actively managed equity funds are more than five times as expensive. Their average fees weigh in at a bloated 1.28% per year.
AUM. Source: Bloomberg Intelligence, Dec 2022.
9. That boring UCITS label is actually useful
The UCITS tag you see everywhere isn’t just designed to make ETF names even longer! It’s actually a seal of quality. Like the regulations ensuring your car doesn’t explode in a Hollywood-style fireball, UCITS ensures compliant European ETFs meet important safety standards such as:
- Being adequately diversified.
- Your assets are properly ring-fenced. So they remain yours in the unlikely scenario that a fund provider goes bankrupt.
- The ETF remains liquid and can be sold even if markets are disrupted.
Like most EU directives, UCITS is dull but we’re glad it’s there.
10. ETFs celebrate their 33rd birthday in 2023
The prototype for all contemporary ETFs launched in Canada on 9 March 1990 as the Toronto 35 Index Participation Units (also known as TIPs). TIPs still exists today as the iShares S&P/TSX 60 Index ETF.
But as with many origin stories, it took another product to truly popularise TIPs innovative new approach. SPY (aka the SPDR S&P 500 ETF Trust) was the 1993 hit that put ETFs on the map. It’s still the world’s largest ETF today.
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FAQs
Disadvantages of ETFs. Although ETFs are generally cheaper than other lower-risk investment options (such as mutual funds) they are not free. ETFs are traded on the stock exchange like an individual stock, which means that investors may have to pay a real or virtual broker in order to facilitate the trade.
What are some interesting facts about ETFs? ›
5 things you should know about ETFs
- ETFs tend to have low management expenses. ...
- ETFs are generally more tax efficient than typical mutual funds. ...
- ETFs provide a clear, ongoing view of their holdings. ...
- ETFs provide convenient, immediate diversification. ...
- ETFs can fill specific niches in your portfolio.
What are the bad things about ETFs? ›
Disadvantages of ETFs. Although ETFs are generally cheaper than other lower-risk investment options (such as mutual funds) they are not free. ETFs are traded on the stock exchange like an individual stock, which means that investors may have to pay a real or virtual broker in order to facilitate the trade.
What is the biggest risk in ETF? ›
The single biggest risk in ETFs is market risk.
What is the basic knowledge of ETF? ›
ETFs or "exchange-traded funds" are exactly as the name implies: funds that trade on exchanges, generally tracking a specific index. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours—potentially lowering your risk and exposure, while helping to diversify your portfolio.
What are the 4 benefits of ETFs? ›
ETFs can offer lower operating costs than traditional open-end funds, flexible trading, greater transparency, and better tax efficiency in taxable accounts. As with all investment choices there are elements to review when making an investment decision.
What makes an ETF unique? ›
ETFs do not involve actual ownership of securities. Mutual funds own the securities in their basket. Stocks involve physical ownership of the security. ETFs diversify risk by creating a portfolio that can span multiple asset classes, sectors, industries, and security instruments.
What's the catch with ETFs? ›
Key Takeaways. ETFs are less risky than individual stocks because they are diversified funds. Their investors also benefit from very low fees. Still, there are unique risks to some ETFs, including a lack of diversification and tax exposure.
Why is an ETF not a good investment? ›
Less Diversification
For some sectors or foreign stocks, ETF investors might be limited to large-cap stocks due to a narrow group of equities in the market index. A lack of exposure to mid- and small-cap companies could leave potential growth opportunities out of the reach of certain ETF investors.
Which ETF gives the highest return? ›
Performance of ETFs
Schemes | Latest Price | Returns in % (as on Jun 20, 2024) |
---|
HDFC Nifty 50 ETF | 259.68 | 10.29 |
Motilal MOSt Oswal M50 ETF | 241.05 | 10.29 |
SBI - ETF Nifty 50 | 248.05 | 10.3 |
Nippon ETF Nifty BeES | 261.72 | 10.31 |
34 more rows
Key Data Points. When it comes to safe investments, the iShares 0-3 Month Treasury Bond ETF is the next safest thing to simply holding cash in your portfolio. The index fund invests in a portfolio of Treasury securities with maturity dates of three months or less.
What is the primary disadvantage of an ETF? ›
ETF trading risk
Spreads can vary over time as well, being small one day and wide the next. What's worse, an ETF's liquidity can be superficial: The ETF may trade one penny wide for the first 100 shares, but to sell 10,000 shares quickly, you might have to pay a quarter spread.
What is the most aggressive ETF to buy? ›
The largest Aggressive ETF is the iShares Core Aggressive Allocation ETF AOA with $1.94B in assets. In the last trailing year, the best-performing Aggressive ETF was AOA at 16.32%. The most recent ETF launched in the Aggressive space was the iShares ESG Aware Aggressive Allocation ETF EAOA on 06/12/20.
What is the best ETF to buy right now? ›
The best ETFs to buy now
Exchange-traded fund (ticker) | Assets under management | Expenses |
---|
Vanguard Dividend Appreciation ETF (VIG) | $76.5 billion | 0.06% |
Vanguard U.S. Quality Factor ETF (VFQY) | $333.3 million | 0.13% |
SPDR Gold MiniShares (GLDM) | $7.4 billion | 0.10% |
iShares 1-3 Year Treasury Bond ETF (SHY) | $24.4 billion | 0.15% |
1 more row
What is an ETF for dummies? ›
An exchange-traded fund (ETF) is something of a cross between an index mutual fund and a stock. It's like a mutual fund but has some key differences you'll want to be sure you understand. Here, you discover how to get some ETFs into your portfolio, how to choose smart ETFs, and how ETFs differ from mutual funds.
How many ETFs should I own as a beginner? ›
Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.
What is the most famous ETF? ›
Most Popular
- #1. SPDR® Portfolio Corporate Bond ETF SPBO.
- #2. iShares Broad USD Invm Grd Corp Bd ETF USIG.
- #3. SPDR® Portfolio Interm Term Corp Bd ETF SPIB.
What are ETFs pros and cons? ›
In addition, ETFs tend to have much lower expense ratios compared to actively managed funds, can be more tax-efficient, and offer the option to immediately reinvest dividends. Still, unique risks can arise from holding ETFs as well as tax considerations, depending on the type of ETF.
What is the most valuable ETF? ›
Largest ETFs: Top 100 ETFs By Assets
Symbol | Name | AUM |
---|
BND | Vanguard Total Bond Market ETF | $109,615,000.00 |
IWF | iShares Russell 1000 Growth ETF | $97,572,500.00 |
IJH | iShares Core S&P Mid-Cap ETF | $82,916,800.00 |
XLK | Technology Select Sector SPDR Fund | $80,693,800.00 |
96 more rows
What to know about investing in ETFs? ›
An exchange-traded fund, or ETF, allows investors to buy many stocks or bonds at once. Investors buy shares of ETFs, and the money is used to invest according to a certain objective. For example, if you buy an S&P 500 ETF, your money will be invested in the 500 companies in that index.