In our search for the best exchange-traded funds (ETFs) we first identified the indices that investors most want to track. We then went in search of minimal tracking difference, low costs, and good liquidity for each ETF selection. We preferred to see at least two years of tracking difference, where possible, but we also have tried to include some of the more innovative ETF launches as well.
This is primarily a list of long-term portfolio building blocks. While you might want to use an ETF to trade short-term movements in the markets, this is not what we have prioritised in compiling the list. We hope that you can use this list as a starting point for your research into the best ETFs for your portfolio.
Where possible, we have chosen the sterling-traded versions of the ETFs. But readers should be aware that the base currency of many ETFs is US dollars. If you feel currency exposure is something you want to manage in an attempt to improve your performance, where possible, we’ve provided the sterling-hedged version of the ETF as an alternative for investors who want to take a view on currency movements.
We used Morningstar data to analyse performance and fees in combination with the the ETF providers’ factsheets. We have also taken into account the many articles and recommendations on ETFs that the IC funds team has written over the past two years.
Click here to access the Top50 ETFs in an excel table format.
SELECTION
GOVERNMENT BONDS (3 funds)
ETFs are good for offering access to very specific sections of the bond market, including areas where it is difficult to add value such as government bonds (also called gilts). Some investors like gilts because they consider them a safe asset, and short-term bonds are less responsive to interest rate changes. But active fund managers find it difficult to add value here and many active funds in this area tend to underperform.
iShares UK Gilts UCITS ETF (IGLT) is an exchange traded fund (ETF) that aims to track the performance of the FTSE Actuaries Government Securities UK Gilts All Stock Index as closely as possible. The ETF invests in physical index securities. The FTSE Actuaries Government Securities UK Gilts All Stock Index offers exposure to Sterling denominated UK government bonds (conventional gilts) quoted on the London Stock Exchange, other than index-linked bonds.
IGLT has a TER of 0.20 per cent and a good record of tracking its index closely.
iShares UK Gilts 0-5yr UCITS ETF (IGLS) aims to track the performance of the FTSE UK Conventional Gilts - Up To 5 Years Index as closely as possible. The ETF invests in physical index securities. The FTSE UKConventional Gilts - Up To 5 Years Index offers exposure to Sterling denominated UK government bonds (conventional gilts) quoted on the London Stock Exchange, with outstanding term of up to 5 years, other than index-linked bonds. Its TER is 0.2 per cent.
iShares Global Government Bond UCITS ETF (IGLO) aims to track the performance of the Citigroup Group-of-Seven (G7) Index as closely as possible. The ETF invests in physical index securities. The Citigroup Group-of-Seven (G7) Index offers exposure to government bonds from G7 countries: Canada, France, Germany, Italy, Japan, United Kingdom and United States. Only investment grade bonds with a minimum remaining time to maturity of one year are included in the index. The ETF has a TER of 0.2 per cent and uses physical sampled replication to track the index. Its base currency is US dollars and it distributes the income.
UK CORPORATE BONDS (4 funds)
The part bond funds play in your portfolio depends on your financial objectives. However most investors should have a portion of capital allocated to corporate bonds – especially if income is your objective.
iShares £ Corporate Bond UCITS ETF (SLXX) This popular ETF gets the analysts' seal of approval. It is liquid at more than £1,000 million and is a low-cost option (0.2 per cent TER) with a broad spread of bonds. It aims to track the performance of the Markit iBoxx £ Liquid Corporates Large Cap Index as closely as possible. This index offers exposure to the most liquid, sterling denominated investment grade corporate bonds. More than half of the bonds are denominated in countries aside from the UK.
SLXX has a good (and long) track record, is very liquid and is available on platforms that deal in ETFs. It follows 296 liquid UK investment-grade corporate bonds, following the Markit iBoxx GBP Liquid Corporates Large Cap Index. It tends to underperform its benchmark, maybe due to its sampling method of replicating the index. But we didn’t find a better option.
SPDR Barclays Sterling Corporate Bond UCITS ETF (UKCO) has the same TER at 0.20 per cent as iShares' offering but it tracks the Barclays Capital Sterling Corporate Index, which is broader than the Markit iBoxx index, meaning the fund holds around twice as many stocks. It’s not as liquid though and doesn’t have as long a track record.
iShares £ Corporate Bond 1-5yr UCITS ETF (IS15) Short term bonds are less responsive to interest rate changes and IS15 is a good offering in this space. The Markit iBoxx £ Corporates 1-5 Index offers exposure to Sterling denominated corporate bonds with an expected remaining time to maturity between 1 and 5 years. The index includes only investment grade bonds with a minimum amount outstanding of £100 million. IS15 has more than 200 holdings and is replicated using the sampling method. The TER is 0.20 per cent and it has a good record of tracking the underlying index.
Pimco Sterling Short Maturity Source ETF (QUID) aims to maximise current income while preserving capital and maintaining a high degree of liquidity. It is unlike other ETFs in this selection because it offers the benefits of an active fund manager with the structure and low costs of an ETF. It mainly invests in short-term investment grade debt denominated in sterling. Its TER of 0.35 per cent makes it much cheaper than active bond funds and money market funds. It can be used for cash allocation in a balanced fund or as a low-risk haven while waiting to buy back into equities.
GLOBAL CORPORATE BONDS (2 funds)
Many investors want to diversify their bond exposure overseas as well as their equity exposure. iShares has a good range of fixed income products that can help you do this. From among these, we have picked two plain vanilla portfolio building blocks:
iShares Global Corporate Bond UCITS ETF (CORP) is an exchange traded fund (ETF) that aims to track the performance of the Barclays Global Aggregate Corporate Bond Index as closely as possible. It has a TER of 0.20 per cent. The ETF invests in physical index securities. The Barclays Global Aggregate Corporate Bond Index offers exposure to investment grade corporate fixed rate bonds issued by corporations in emerging and developed markets worldwide, with a minimum maturity of at least 1 year. In order to achieve its investment objective, the Fund may also invest in government bonds with the intention of obtaining a similar performance (with matching risk profile) to certain constituents of the fund's benchmark index.
Note the base currency for this ETF is US dollars so there is exchange rate risk. It distributes the income semi annually.
iShares Global High Yield Corporate Bond UCITS ETF (HYLD) aims to track the performance of the Markit iBoxx Global Developed Markets Liquid High Yield Capped Index by investing in physical index securities. The index is designed to provide a balanced representation of the global developed high yield corporate market by means of the most liquid high yield corporate bonds available. The weight of each issuer in the index is capped at 3 per cent. The TER is 0.5 per cent and the ETF distributes its income semi annually.
GOLD (3 funds)
Many investors like to hold gold in their portfolios as a hedge against inflation and insurance for their portfolio. A gold bar is often reached for in periods of political and economic uncertainty. And there is evidence that the price of gold is correlated with market uncertainty. Others argue that gold produces no income at all - its value is entirely subjective so it shouldn’t be held in a portfolio.
There are 3 physical gold exchange traded commodities (ETCs) that we like:
Source Physical Gold ETC (SGLD) aims to provide the performance of the spot gold price through certificates collateralised with gold bullion. Each Gold P-ETC is a certificate which is secured by gold bullion held in JPMorgan Chase Bank’s London vaults. SGLD’s tracking difference was excellent over the periods we looked at and we felt its transparency was commendable, too. Its TER is 0.29 per cent. SGLD is traded in US dollars.
ETFS Physical Gold ETC (PHGP) is big, liquid and transparent, it has good performance and excellent communication with investors. PHGP is backed by physical allocated gold held by HSBC Bank USA. It provides a return equivalent to movements in the gold spot price less the relevant management fees. Its TER is 0.39 per cent. PHGP is traded in sterling but its underlying base currency is US dollars.
db Physical Gold GBP Hedged ETC (XGLS) UK retail investors have traditionally faced two difficulties in investing in gold: how to take direct exposure to the gold price, and then how to get ‘pure’ exposure thereafter – ie exposure that’s free from implicit US dollar currency risk. Gold is priced in US dollars on the international markets, which means that UK investors in gold usually have to accept implicit foreign-exchange risk. In April 2011 db X-ETC launched this fund to allow UK retail investors to trade gold in sterling hedged ETC form. Backed by allocated gold the ETC is equipped with a currency hedging mechanism to minimise the GBP/USD exchange-rate risk. On top of the 0.29 per cent management fee there is a 0.40 per cent foreign exchange hedge fee.
US EQUITIES (4 funds)
The US really lends itself to passive investing as there are few US active managers who have consistently beaten their market. US ETFs track different indices containing selections of US-listed companies ranked in different ways. The most popular is the S&P 500 index, which tracks the largest US companies according to their share price.
SPDR S&P 500 ETF (SPX5) aims to track the performance of the S&P 500 index as closely as possible. This is a float-adjusted, capitalisation weighted index of the top 500 companies in the US market. The index is designed to provide exposure to the large cap segment of the US equities market and spans over 24 separate industry groups. It captures approximately 75 per cent of the market capitalisation of US equities. The ETF has a TER of 0.15 per cent.
db x-trackers Russell 2000 ETF (XRU2) aims to track the performance of the Russell 2000 index. This index provides exposure to a wide range of US smaller companies, including many of the technology start-ups that have experienced meteoric rises in recent years. This index is more expensive to track, which leads to higher fees, but analysts say the enhanced performance makes the trade-off worthwhile.
The ETF uses indirect replication via an underlying portfolio and swap structure. It has tracked its index well and has a TER of 0.45 per cent. The ETF reinvests the income.
PowerShares EQQQ Nasdaq-100 UCITS ETF (EQQQ) is designed to track the performance of 100 of the largest non-financial companies listed on the NASDAQ stock exchange. About 60 per cent of the Nasdaq’s constitutents are technology companies, with some healthcare and consumer stocks thrown into the mix too. This is a fully physically replicated ETF with a total expense ratio of 0.3 per cent and a base currency of US dollars.
SPDR S&P US Dividend Aristocrats UCITS ETF (USDV) is based on the S&P High Yield Dividend Aristocrats Index, which is designed to measure the performance of companies within the S&P Composite 1500 that have followed a managed dividends policy of consistently increasing dividends every year for at least 20 years. It is eligible for Isas and Sipps and has a total expense ratio of 0.35 per cent.
USDV is a physically replicated ETF that buys the underlying holdings in the index. It has also tracked its benchmark index closely since launch in October 2011. USDV distributes income on a quarterly basis, making it a good option for income investors.
UK EQUITIES (4 funds)
These UK equity ETFs can be used as core holdings for your portfolio. But bear in mind that most UK investors have too much of a ‘home’ bias in their portfolios. You should make sure that you also have exposure to overseas equities.
iShares FTSE 100 UCITS ETF Acc (CUKX) aims to track the FTSE 100 Index of the UK’s leading companies. It offers exposure to the 100 largest UK equity securities by full market value. CUKX reinvests the dividend for you. The ETF invests in physical index securities and has a TER of 0.15 per cent. Another ETF to watch is db x-trackers FTSE 100 UCITS ETF (XDUK) which has a lower fee of 0.09 per cent but a shorter track record.
SPDR FTSE UK All Share UCITS ETF (FTAL) uses physical optimised sampling to track the performance of the FTSE All Share, which means it may hold much fewer holdings than the constituents of the index. Although this index casts a wider net than the FTSE 100 it is still focussed on mega-cap blue chips. It’s not actually ALL the market as the title may imply. Although it includes the FTSE 100, the FTSE250 and the FTSE Small Cap, it doesn’t include micro-caps in the FTSE Fledgling Index. There are more than 600 constituents of the FTSE All Share and the ETFs that follow this index don’t hold all of them.
However, this ETF has a good two year record of tracking the underlying index. It is also cheaper than rival FTSE All Share ETFs with a TER of 0.30 per cent.
db x-trackers FTSE 250 UCITS ETF DR (XMCX) is a fully physically replicated fund that tracks the FTSE 250 Total return index. The FTSE 250 Index consists of the 101st to the 350th largest companies on the London Stock Exchange. It is a crucial index because it is very much focused on UK Plc as an economy, with companies that will genuinely capture the future growth potential of the British economy, mostly through sterling based earnings. There are six mid-cap ETFs to choose from. XMCX distributes the yield to investors and has a TER of 0.35 per cent. It has an excellent record of tracking the underlying index.
iShares MSCI UK Small Cap UCITS ETF GBP (CUKS) Investors who want to track the performance of UK small companies suffer from the absence of small cap ETFs that track the FTSE Small Cap index, FTSE Fledgling Index or RBS Hoare Govett Smaller Companies Index. These indices would cover companies that aren’t already in the indices above.
CUKS is the best option we can find for investors who want UK small caps. This is a physically optimised fund that aims to replicate the performance of the MSCI UK Small Cap index. It has a TER of 0.58 per cent. However, this index is doing a lot of fishing in the FTSE 250 layer of the market. What it defines as small cap, many UK investors think of as mid cap. And that could mean some major overlap if you’re already holding FTSE 250 funds.
UK EQUITY INCOME (2 Funds)
Dividends are important for equity investors seeking income. But for growth investors they can also be reinvested to boost growth over time, so UK equity income funds can be used as core holdings. Investors with large direct holdings in FTSE 100 companies should watch any overlap with their existing portfolio.
iShares UK Dividend UCITS ETF (IUKD) aims to track the performance of the FTSE UK Dividend+ Index as closely as possible. This means it tracks the 50 highest-yielding stocks of the 350 biggest companies (excluding investment trusts) on the London Stock Exchange. Stocks are selected and weighted by one-year forecast dividend yield. It’s a sensible option for investors looking for an income as it tracks the firms with the lowest share price relative to the dividend they pay. It is physically replicated and has a TER of 0.4 per cent. It distributes the income to investors.
SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV) aims to track the performance of 30 high dividend-yielding equity securities issued by companies from within the UK. It aims to do this by tracking the performance of the S&P UK High Yield Dividend Aristocrats Index as closely as possible. The S&P UK High Yield Dividend Aristocrats Index is designed to measure the performance of the 30 highest dividend-yielding UK companies within the S&P Europe Broad Market Index (BMI), as determined in accordance with the Index methodology, that have followed a managed dividends policy of increasing or stable dividends for at least 10 consecutive years. So this is about historical dividend record rather than forecasting. Its TER is 0.30 per cent. It is physically replicated and distributes the income to investors.
WORLD EQUITY (3 funds)
A broadly diversified global equity ETF can make a great low cost core holding for your portfolio. Here are our three favourites.
db x-trackers FTSE All-World Ex UK UCITS ETF (XWXU) tracks the FTSE All World ex UK index. This ‘mega-index’ represents a very simple idea – when investors are looking to diversify internationally, why not buy into one tracker that follows a big, aggregate index of nearly all the world’s stock markets? The index comprised large and mid cap stocks providing coverage of developed and emerging markets worldwide. Most British investors are far too biased towards UK stocks and this index specifically excludes UK stocks. The ETF uses indirect replication and is the only ETF that we could find that tracks this index. There are more than 2700 stocks from 54 countries in the index so this method of tracking makes sense. The portfolio structure is a fully funded collateralised swap and the ETF’s TER is 0.40 per cent. The income is reinvested in the fund.
iShares MSCI World UCITS ETF Acc (SWDA) tracks the MSCI World Index. This is a stock market index of more than 1,600 stocks from 23 developed markets, including the UK. It is often used as a common benchmark for actively managed 'world' or 'global' equity funds. However, it excludes stocks from emerging and frontier economies making it less worldwide than the name suggests. This may appeal to investors with lower appetite for risk. There are plenty of ETFs that track this index.
SWDA uses physical optimisation, meaning it doesn’t hold all the stocks in the index. However, it has a good record of tracking the underlying index since it launched in 2009. Its TER is 0.40 per cent. The base currency is US dollars. Investors who want to avoid currency risk could look at the iShares MSCI World GBP Hedged UCITS ETF (IGWD). Income investors might want to look at the iShares MSCI World UCITS ETF Inc (IWRD) which has a more expensive TER of 0.50 per cent.
Powershares FTSE RAFI All World 3000 UCITS ETF (PSRW) will give you a broad selection of stocks in both the developed market and the emerging markets, focusing on stocks it perceives as inexpensive. Powershares invests in an index put together b FTSE and RAFI that focuses on companies’ economics and disregards their stock market value, so it can find cheap stocks. It has a TER of 0.5 per cent, which is reasonable considering it invests in emerging markets.
GLOBAL HIGH DIVIDENDS (2 funds)
Although UK equities are a great source of income, UK investors should also look to diversify their income sources overseas.
db x-trackers SToxx Global Select Dividend 100 UCITS ETF (XGSD) is one of db x-trackers' longest established income ETFs and has a good yield. It aims to track performance of the STOXX® Global Select Dividend 100 index, which is calculated to measure the performance of the highest dividend paying stocks in Americas, Europe and Asia/Pacific. The index components are weighted by their indicated annual net dividend yield, and the largest dividend yielding companies have the highest weight in the index. The number of constituents is fixed and the cap factor guarantees the index diversification. The ETF makes dividend payments annually. It will mainly invest in transferable securities and use derivative techniques such as index swap agreements negotiated at arm's length with the swap counterparty. It has a TER of 0.50 per cent.
Lyxor ETF SG Global Quality Income NTR C-GBP (SGQL) aims to give the performance of the SG Global Quality Income NTR index which tracks companies with attractive and sustainable dividends. The index recognised that in the long run, dividends have dominated equity returns, and higher risk has not provided higher rewards. In that respect, the index methodology defines an investment universe of non financial companies which have a free float adjusted market capitalisation of at least US$3billion from developed countries. The ETF uses synthetic replication to replicate the index via a performance swap. The TER is 0.45 per cent.
JAPAN (3 funds)
The Japanese stock market has seen a renaissance in recent years and as the Tokyo Stock Exchange is one of the world’s biggest stock exchanges by market capitalisation, you should have some exposure in your portfolio.
Vanguard FTSE Japan UCITS ETF (VJPN) is the lowest cost Japan equity ETF offered in the marketplace at a TER of 0.19 per cent. It aims to track the performance of the FTSE Japan index using physical replication. Its base currency is US dollars and it distributes the income quarterly. Although it was launched in May 2013, it comes from a well-established player in the passive investment arena.
db x-trackers MSCI Japan Index UCITS ETF (XMJG) aims to track the MSCI Japan monthly GBP hedged index, which provides exposure to the MSCI Total Return Net Japan Index as adjusted by transactions whose aim is to reduce the effect of Yen/Sterling exchange rate fluctuations (currency hedging). The ETF replicates the index by a fully funded collateralized swap and has a TER of 0.60 per cent. It reinvests the income so is suited to investors looking for capital growth.
iShares MSCI Japan Small Cap UCITS ETF Acc (CJPS) aims to track the performance of the MSCI Japan Small Cap Index by investing in physical index securities. It has a TER of 0.58 per cent and reinvests the income so is suited for investors looking for capital growth.
EUROPE (5 funds)
The main European indices are the Euro Stoxx 50, which invests in selected 50 blue-chip companies in the 12 eurozone countries and the MSCI Europe – a broader index that tracks stocks in the 18 European nations. The MSCI Europe won’t offer you a pure continental Europe fund, which you might want because of the stark differences between the UK and Europe. If you want to exclude the UK, plump for the Euro Stoxx 50, or you can get exposure through an ex-UK MSCI Europe fund.
db x-trackers Euro Stoxx 50 UCITS ETF (XESC) also aims to track the Euro Stoxx 50 index as closely as possible. The ETF invests in physical index securities and has a TER of 0.09 per cent. It reinvest the income from the underlying securities into the fund so it is more suited to growth investors.
HSBC Euro Stoxx 50 UCITS ETF (H50E) aims to track the Euro Stoxx 50 index as closely as possible. The ETF invests in physical index securities and has a TER of 0.15 per cent. It distributes the dividend income on a semi-annual basis so is suitable for income investors.
iShares MSCI Europe ex-UK UCITS ETF (IEUX) aims to track the MSCI Europe Ex-UK Index which offers exposure to continental developed European countries. It has a TER of 0.40 per cent and distributes the dividend income on a quarterly basis.
Source Man GLG Europe Plus ETF (MPFE) offers an unusual strategy for which the underlying index composition is not dictated by market capitalisation of its constituents but by broker recommendations. It uses high quality ideas from approximately 65 leading brokers. Its trading currency is Euros and it has a TER of 0.75 per cent.
db x-trackers MSCI EUROPE SMALL CAP INDEX UCITS ETF (DR) 1C GBP (XXSC) aims to track the performance of Europe’s Small Cap size securities. The ETF uses direct replication using optimised sampling to track the index and has a TER of 0.40 per cent. Its base currency is US dollars and it reinvests the income.
ASIA (3 funds)
The Asia Pacific region is more diverse than most investors realise. There are the emerging markets of China, India and Thailand, the developed economies of Japan, and Australia and New Zealand where investors can find good yield opportunities.
db x-trackers MSCI AC Asia Ex Japan High Dividend Yield Index UCITS ETF 1D (XAHG) is the broadest Asian dividend ETF with almost 200 stocks represented. The benchmark index includes only securities that offer a higher than average dividend yield relative to the MSCI AC Asia ex Japan Index and that pass dividend sustainability screens. It’s a synthetic fund, constructed using a fully funded collateralised swap and its TER is 0.65 per cent.
iShares Asia Pacific Dividend UCITS ETF (IAPD) is a physically replicated alternative that buys the underlying shares in the Dow Jones Asia/Pacific Select Dividend 30 Index. This index measures the performance of 30 leading stocks by dividend yield from Asia/Pacific countries. It has a TER of 0.59 per cent and distributes the income quarterly.
iShares MSCI AC Far East ex-Japan SmallCap UCITS ETF GBP (ISFE) aims to track the performance of the MSCI AC Far East ex Japan Small Cap Index as closely as possible. The ETF invests in physical index securities. The MSCI AC Far East ex Japan Small Cap Index offers exposure to East Asian small cap stocks which rank below the MSCI AC Far East ex Japan Index measured by market capitalisation and comply with MSCI's size, liquidity, and free float criteria. East Asia is defined as Asia excluding India. The TER is 0.74 per cent and the ETF uses physical optimised replication to track the index. It distributes the income.
EMERGING MARKETS (6 funds)
Emerging markets are high risk, being traditionally the hardest his when there is a wider market sell-off. The funds highlighted below will give you plenty of diversification in these high risk markets.
Vanguard FTSE Emerging Markets ETF (VFEM) gets the thumbs up from the analysts for ‘unbeatable value’. It has tracked its index (FTSE Emerging markets) well and has a TER of 0.29 per cent, which is the cheapest available on the London Stock Exchange.
iShares MSCI Emerging Markets Minimum Volatility (EMMV) aims to reflect the performance of a subset of securities within the MSCI Emerging Markets Index with the lowest absolute volatility of returns, subject to risk diversification. It is traded in US dollars on the London Stock Exchange. The ETF replicates index performance by physical optimised methodology. It reinvests income and its TER is 0.4 per cent. This is for investors who want a smoother ride in emerging markets.
db x-trackers Harvest CSI 300 Index UCITS ETF (RQFI) launched in January 2014 and is a physical fund that invests directly in domestic China A shares listed in Shanghai. The CSI 300 index gives a broad exposure to Chinese small and medium-sized stocks. It has a spread of industrial companies, healthcare and durable goods companies. Its TER is 1.1 per cent.
HSBC MSCI Brazil ETF (HBRL) tracks the performance of the MSCI Brazil index, which is designed to measure the performance of the large and mid-cap segments of the Brazilian market. It is the cheapest Brazil ETF with a TER of 0.60 per cent and has tracked its index well using physical replication. The ETF’s currency is US dollars.
db x-trackers MSCI Russia Capped Index UCITS ETF 1C GBP (XMRC) will allow you to track the Russian stock market but with less exposure to oil and gas. The index is composed of the constituents of Russia’s standard Index, the MSCI Russia Index. However, constituents whose weights are greater than 25 per cent are capped daily to 22.5 per cent and quarterly to 20 per cent. The TER is 0.65 per cent and the ETF reinvests dividend income back into the fund.
db x-trackers MSCI India Index UCITS ETF (XCX5) aims to track the MSCI India Total Return Index, which includes ordinary shares of all large and mid-cap companies with a market capitalisation within the top 85 per cent of the Indian stock market. Dividends are reinvested and the TER is 0.75 per cent.
BROAD COMMODITIES (3 funds)
Commodities are a very high risk and volatile investment area, but a broadly diversified commodity ETF can help to lower that risk.
db x-trackers dbLCI OY Balanced Ucits ETF (XdbG) tracks the Deutsche Bank Liquid Commodity Index - Optimum Yield. This means it invests in a basket of 14 commodities (which dilutes the risk), including WTI Crude Oil, Brent Crude Oil, Heating Oil, RBOB Gasoline, Natural Gas, Gold, Silver, Aluminium, Zinc, Copper, Corn, Wheat, Soybeans and Sugar. It uses db's Optimum Yield methodology for futures trading. This aims to optimise the roll yield, which means it will maximise positive roll yield or minimise any negative roll yield (just a smarter way of taking the rolling futures exposure). It is GBP hedged and has a net expense ratio of 0.55 per cent.
ETFX DJ-UBS Longer Dated All Commodities GO UCITS ETF (CMFP) provides a highly diversified way to gain exposure to commodities. The benchmark index caps the weighting of any one commodity sector and commodity. It tracks longer-dated commodity futures total returns which has helped reduce the contango drag that has affected some active funds and other commodity indexes. The TER is 0.55 per cent.
ETFS Industrial Metals DJ-UBSCI (AIGI) is designed to enable investors to gain an exposure to a total return investment in a basket of commodity futures contracts by tracking the Dow Jones-UBS Industrial Metals Subindex. Top holdings in the index are copper, nickel, aluminium and zinc. This is a synthetic product, being fully funded by a collateralised swap. The TER is 0.49 per cent.
PROPERTY (2 funds)
Because property ETFs buy shares rather than “bricks and mortar” property it means they are more likely to move in line with stock markets than the property market, and so may not provide as much diversification for your portfolio as a fund which directly invests in commercial properties.
iShares UK Property UCITS ETF (IUKP) is the only property ETF listed in London which focuses on the UK. It tracks the FTSE EPRA/NAREIT UK Index which includes a number of investment trusts focused on the sector, as well as some of the best known UK property firms. The ETF uses physical replication – it buys the shares it tracks rather than getting its exposure via a swap and has a TER of 0.4 per cent.
HSBC FTSE EPRA/NAREIT Developed UCITS ETF (HPRO) aims to track the performance of the largest real estate companies of the world’s developed equity markets, including the US, Japan, Hong Kong, Australia, Britain, Singapore, France and Canada. It uses full physical replication to track the benchmark index and has a TER of 0.40 per cent. Dividends are distributed quarterly in US dollars.
PRIVATE EQUITY (1 fund)
One alternative asset class that many investors use to diversify their portfolio is private equity. Private equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange. It’s a high risk asset class.
iShares Listed Private Equity UCITS ETF (IPRV) aims to track the performance of the S&P Listed Private Equity Index as closely as possible. The S&P Listed Private Equity Index offers exposure to the leading publicly listed companies that are active in the private equity space around the world and meet specific size, liquidity, and business activity requirements. It has a TER of 0.75 per cent and uses physical optimised replication to track the index.
