Europe is home to some of the biggest and best-known companies in the world, including Nestlé S.A. (NESN), Volkswagen A.G. (VOW3), and SAP S.E. (SAP). Investors looking for broad exposure to the European market may consider buying exchange-traded funds (ETFs). Europe-focused ETFs provide diverse exposure to companies in this market, helping to mitigate the risk often associated with investing in individual stocks.
Europe’s economic recovery slowed in the final few months of 2021 due to surging COVID-19 variants. In the fourth quarter (Q4) of 2021, the eurozone economy grew by 0.3%, down from 2.2% for Q3 2021. In spite of the slowdown, the region regained pre-crisis gross domestic product (GDP) levels. The Austrian and Greek economies were hit especially hard in 2020, with Austria plunging by 6.7% and Greece by 9.0%, according to The World Bank. Austria’s economy has continued to struggle, shrinking by 2.2% in Q4 2021. Greece has fared better overall, with projections estimating 8.0% overall economic growth for 2021.
- The European stock market has underperformed the U.S. equities market in the past year.
- The Europe exchange-traded funds (ETFs) with the best one-year trailing total returns are EUFN, EWO, and GREK.
- The top holdings of these ETFs are HSBC Holdings PLC, Erste Group Bank A.G., and Hellenic Telecommunications Organization SA, respectively.
There are 44 Europe ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as ETFs with less than $50 million in assets under management (AUM). European equities, as measured by the MSCI Europe Index, have underperformed the U.S. stock market over the past 12 months, with a total return of 13.3% compared with the S&P 500’s total return of 23.3%, as of Jan. 31, 2022. The best-performing Europe ETF, based on performance over the past year, is the iShares MSCI Europe Financials ETF (EUFN). We examine the three best Europe ETFs below, based on performance over the past year. All numbers below are also as of Jan. 31, 2022.
- Performance Over One-Year: 28.7%
- Expense Ratio: 0.48%
- Annual Dividend Yield: 2.34%
- Three-Month Average Daily Volume: 1,189,605
- Assets Under Management: $1.9 billion
- Inception Date: Jan. 20, 2010
- Issuer: BlackRock Financial Management
EUFN tracks the MSCI Europe Financial Index, comprised of European equities in the financial sector. U.K.-based stocks make up just over 25% of holdings, followed by companies based in Switzerland, Germany, and France. Banks stocks make up the largest share of the portfolio, followed by insurance and diversified financials companies. More than three-quarters of the portfolio is comprised of banks and insurance companies. The top holdings of EUFN include HSBC Holdings PLC (HSBA:LON), a U.K.-based international investment bank and financial services company; Allianz SE (ALV:ETR), a Germany-based financial services company; and Class A shares of BNP Paribas SA (BNP:PAR), a France-based international banking group.
- Performance Over One-Year: 25.5%
- Expense Ratio: 0.51%
- Annual Dividend Yield: 1.63%
- Three-Month Average Daily Volume: 38,266
- Assets Under Management: $79.8 million
- Inception Date: March 12, 1996
- Issuer: BlackRock Financial Management
EWO tracks the MSCI Austria IMI 25/50 Index, which is designed to measure the performance of a broad range of companies trading on the Austrian market. While the ETF aims to provide broad exposure to the Austrian economy, it is heavily tilted toward financials, energy, industrials, utilities, and materials, accounting for more than four-fifths of the portfolio. Its top three holdings are Erste Group Bank A.G. (EBS:WBO), a financial services provider; OMV A.G. (OMV:WBO), an integrated oil, gas, and petrochemical company; and Class A shares of VERBUND A.G. (VER:WBO), an electricity provider.
- Performance Over One-Year: 24.8%
- Expense Ratio: 0.58%
- Annual Dividend Yield: 1.89%
- Three-Month Average Daily Volume: 56,466
- Assets Under Management: $127.4 million
- Inception Date: Dec. 7, 2011
- Issuer: Mirae Asset Global Investments Co. Ltd.
GREK tracks the MSCI All Greece Select 25/50 Index, focusing on the largest and most liquid companies in Greece. It is the first and only fund to directly target Greece. Financials, consumer discretionary, and communication stocks are the three largest components of the portfolio, although the fund holds companies from a wide range of sectors and industries. The fund invests in a blend of value and growth stocks. The top holdings of GREK include Hellenic Telecommunications Organization SA (HTO:ATH), a telecommunications services company; Alpha Services & Holdings SA (ALPHA:ATH), a commercial banking services and holding company; and Eurobank Ergasias Services & Holdings SA (EUROB:ATH), a commercial and retail banking services company.
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