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Top 50 ETFs 2017

Our updated selection of the best ETFs for any portfolio
Top 50 ETFs 2017

Investors Chronicle’s Top 50 exchange traded funds (ETFs) list is in its fourth year. Our selection of core portfolio building blocks was launched in 2014, and each year we seek out the best value ETFs on the market to come up with a mix of long-term core buy-and-hold strategies, and more innovative ETFs that we think could generate extra returns for your portfolio.

This year we have made 24 changes to our 2016 selection, taking advantage of cuts to ongoing charges, new launches and changes in size or liquidity, and have created two new categories. We have maintained a focus on areas such as the US, where active managers usually fail to add value, and added a selection of higher-yielding funds for investors seeking income in today’s low-yield market.

To come up with our final list we have weighed up metrics including liquidity, fund size, trading costs, total returns and tracking difference, as well as headline fees. We have also consulted a panel of experts in order to debate the best markets to use ETFs in and the best benchmarks to use in those areas.

This year our panel consists of:

■ Hortense Bioy, analyst at Morningstar

■ Alan Miller, founder of SCM Direct

■ James McManus, analyst at Nutmeg

■ Oliver Smith, portfolio manager at IG

■ Lynn Hutchinson, assistant director at Charles Stanley Pan Asset

■ Irene Bauer, chief investment officer at Twenty20 Investments

■ Ben Seager-Scott, chief investment strategist at Tilney Group

■ David Liddell, chief executive at IpsoFacto Investor

■ Paul Taylor, managing director at McCarthy Taylor


We started by analysing the performance and tracking record of our 2016 list. Then we asked our panel a) to review the spread of categories and recommend any to be expanded, added or dropped and b) to consider the best indices to track in those categories and recommend specific ETFs for those categories. We then crunched Morningstar data on the entire London-listed ETF universe to find the best ETFs based on fund size, liquidity (defined by average daily trading volumes), ongoing charge, tracking difference and total returns from a range of broad categories.

The ETFs we choose are designed to be the best value options, while taking account of various factors. For example, the cheapest ETF on an ongoing charge basis is not necessarily the cheapest when trading costs are considered. An ETF with very low trading volumes and a wide bid-offer spread will end up hurting your returns, even if it looks tempting on an ongoing charge basis.

The list is not designed as a buy list, but as a starting point for cheap-and-easy access to these markets and sectors and our decision to drop an ETF from the selection does not mean we no longer think it worth owning. Many of the changes we have made for 2017 reflect cuts to ongoing charges, new ETF launches and changes to ETF liquidity and size. Other changes have been made to reflect our current views on which benchmarks and markets are the best to track.

In many cases the decision has been taken in order to prioritise a different strategy or style or include broader market ETFs. Generally, we lean towards the most straightforward fund structures and tend to prioritise physically replicating ETFs where possible.





Investors often put too much focus on their home markets, but it remains an important building block for your portfolio. These ETFs are good options for low-cost core exposure to the key segments of the UK stock market and are all large and liquid.

Dropped from 2016 selection

db x-trackers FTSE 100 Equal Weight UCITS ETF (XFEW)

We introduced this ETF last year as a way to mitigate the top-heavy nature of the FTSE 100, which is heavily weighted towards a few large-cap stocks, and we still like the strategy. However, the ETF has failed to build up assets since launch and remains small, so not as liquid as we would like for a core UK holding. The equal weighting approach also means higher turnover, so higher implicit costs.

New list

iShares Core FTSE 100 UCITS ETF (ISF)

This remains the best value ETF for FTSE 100 exposure as the lowest cost, largest and most liquid of all competing FTSE trackers. Since we published the Top 50 ETFs last year, ISF has grown to almost £5bn in size and according to Morningstar it has hugged the benchmark better than any other broad UK equity ETF. It has also been the most highly traded of any UK ETF over one year, with an average of more than 4.5m shares traded daily over the past three months to May 2017. That makes it cheap on both an explicit and implicit basis. ISF is a physically replicating ETF and is a straightforward ETF perfect for a core portfolio building block.


The FTSE All-Share index is a key index for UK investors as it covers 98 per cent of the UK stock market and also has a 20 per cent allocation to mid- and small-cap companies, meaning it offers broader and more diversified exposure than the mega-cap heavy FTSE 100. The majority of our panel recommended keeping this ETF, which carries the lowest ongoing charge of any FTSE All-Share ETF on the London Stock Exchange (LSE). It has tracked its index well over one year and is also among the largest UK equity ETFs available, with assets of over £190m. Because this is a large index this ETF does not hold all of the stocks within it and instead tracks a representative sample.

Vanguard FTSE 250 UCITS ETF (VMID)

This is an ultra-low-cost way to track the UK mid-cap index. This ETF gives investors access to mid and small caps and, with an ongoing charge of 0.1 per cent, is less than half the cost of its nearest rival. It is a good core holding for UK investors, and is liquid and cheap to trade. It has gathered assets of over £480m despite being only three years old and remains good value. Four of our panellists recommended keeping this ETF in our selection. Over three years the FTSE 250 has returned more than the FTSE All-Share and FTSE 100 and is a good way for UK investors to diversify their UK equity holdings.

SPDR S&P UK Dividend Aristocrats UCITS ETF (UKDV)

The UK is a good market for income seekers due to the high headline yield on the FTSE 100. However, income here comes with a higher risk than other developed markets due to the highly concentrated nature of UK stocks. SPDR’s strategy focuses only on sustainable, long-term dividend-paying stocks and only tracks those that have increased payouts for 10 years or more. It also includes quality screens in order to exclude companies with unsustainable dividends where future yields could be under threat. Despite its more conservative income focus, UKDV still carries a higher yield than almost all but one rival income strategy, at just under 4 per cent, and a lower ongoing charge, at 0.3 per cent. iShares UK Dividend UCITS ETF (IUKD) does carry a higher yield, but includes no quality screens and we feel is vulnerable to yield traps. SPDR is also one of the larger income strategies, with over £104m assets under management (AUM) and has a track record spanning more than five years.





The US remains an excellent area for passive investing as it is a notoriously difficult one for active managers to beat. In many cases, investing in US stocks – which can also be expensive – via a cheap ETF is a better way to access efficient benchmarks such as the S&P 500. We have included a broad mix of ETFs in our list, including one tracking the fast-growth Nasdaq 100 index, a new small-cap ETF and broad market-cap-weighted options. Note that many US equity ETFs will outperform their indices due to favourable withholding tax differences between the index and the fund.

Dropped from 2016 list

Vanguard S&P 500 UCITS ETF (VUSA)

We have switched Vanguard S&P 500 UCITS ETF (VUSA) for iShares Core S&P 500 UCITS ETF (CSPX) as the latter is now the better tracker over three years and is the largest too. We still think VUSA is a solid option, but prefer CSPX this year.

PowerShares S&P 500 High Dividend Low Volatility (HDLG)

We have cut this ETF in favour of a currency hedged smart-beta ETF. We already have two other dividend-focused ETFs in the list and this is the least focused on sustainable dividends, with a shorter track record.

SPDR Russell 2000 US Small Cap UCITS ETF (R2SC)

We have replaced it this year with a different small-cap option that we think could outperform over the long term. However this ETF remains a solid option for investors keen to track the Russell 2000 index.

New list

NEW: iShares Core S&P 500 UCITS ETF (CSPX)

This ETF is the same price as our former choice – just 0.07 per cent – but is now larger, with assets under management (AUM) of almost £16bn, which dwarfs our former choice (Vanguard S&P 500 UCITS ETF (VUSA) by some margin. That means that its bid-offer spread (the gap between its buy and sell price) is narrow and, over one and three years, CSPX has tracked better than VUSA. The S&P 500 is the most well-known index for US stocks and tracking it via a passive fund makes sense due to the small number of active managers who manage to consistently beat it. Since launch, this ETF has ranked in the first quartile of its Morningstar category, which includes both passive and active funds, and generated better risk-adjusted returns. The ETF outperforms its index due to a difference in withholding tax between the index and the fund.

PowerShares EQQQ Nasdaq-100 UCITS ETF (EQQQ)

The US plays home to some of the world’s most exciting technology companies, which are harder for UK investors to buy. This ETF gives investors access to technology giants such as Facebook, Amazon and Google via the Nasdaq 100 index, which tracks the performance of the 100 largest non-financial companies listed on the Nasdaq exchange. The index has been a stellar performer in recent years and according to Morningstar this ETF was the best performing of any US equity ETF over three years to May 2017. However it is a high-risk play. Technology stocks are looking expensive and this index is highly concentrated, with almost 60 per cent in the technology sector and more than 12 per cent in Apple. But for investors seeking Nasdaq 100 exposure this ETF remains the largest and most liquid option, with an ongoing charge of 0.30 per cent and around £1.2bn in AUM.

NEW: iShares S&P Small Cap 600 (ISP6)

US small-cap stocks have historically outperformed large-caps and are a good bet on a domestic US recovery. With an ongoing charge of 0.40 per cent our new small-cap US equity ETF is 10 basis points more expensive than our former choice, SPDR Russell 2000 UCITS ETF. But the S&P Small Cap 600 has delivered higher returns than the Russell 2000 over the medium and long term, with lower volatility, making it a superior index. The S&P Small Cap 600 index also avoids some of the pitfalls of the Russell 2000 by incorporating only liquid shares (the index requires at least 50 per cent of a stock’s shares to be trading in the market) and screening out unprofitable stocks and recent IPOs, resulting in a portfolio of more profitable companies at better valuations. ISP6 is smaller in assets than our previous choice, but with assets of $1.2bn has ample liquidity and is reasonably priced for a market-beating and intelligent ETF.


This ETF tracks the MSCI USA value index, a factor-based index that gives a higher weighting to unloved, cheaper stocks with higher yields. Value is one of the most popular styles of factor index at the moment (other common factors include quality and growth indices) and dramatically outperformed other factor indices, including those tilted towards quality and growth stocks in 2016. With more interest rate hikes on the horizon in the US and defensive stocks looking expensive, there is reason to think the value trade could have further to run. This ETF is a good way of accessing the theme, with a low ongoing charge of 0.2 per cent and reasonable AUM of over £400m. It has a higher weighting in financials than the comparable market-cap-weighted index, the MSCI USA, at 23.3 per cent compared with 13.8 per cent, and top holdings tend not to include big technology names such as Amazon and Facebook, which have large weightings in the MSCI USA.

NEW: iShares S&P 500 GBP hedged UCITS ETF (IGUS)

With sterling and the dollar likely to be engaged in volatile dynamics throughout this year, it could make sense to remove the impact of currency from your returns, and this ETF carries a lower ongoing charge than many hedged ETFs. Oliver Smith suggests adding it following a substantial fee cut from 0.45 per cent to 0.2 per cent. Its AUM is large enough to make it a liquid option, and assets could grow following the cut to its ongoing charge. Be aware that if the dollar weakens against sterling, returns on this ETF will outpace the broader market, but if sterling weakens against the dollar you can expect to generate less in total returns than you would with an S&P tracker. Currency hedging is difficult to find among actively managed funds and you tend to pay a high premium for the privilege. So it makes sense to use a passive fund to do this.

SPDR S&P US Dividend Aristocrats UCITS ETF (USDV)

This is a well-established income-focused ETF with a longer track record, lower cost and hefty AUM compared with rival ETFs. SPDR tracks the performance of companies within the S&P Composite 1500 index that have sustainably increased dividends for 20 years or more. It is a way of homing in on the most reliable dividend payers, but the index still yields 2.7 per cent and USDV has a reasonable ongoing charge of 0.35 per cent. It is physically replicating and has a larger basket of stocks than other ETFs in the SPDR Dividend Aristocrats range due to the larger number of companies having paid out consistently increasing dividends, meaning it is well diversified by holding. The ETF is also one of the most liquid ETFs tracking US equities, for both income or growth, with assets of over $2bn and more than 96,000 shares traded daily on average over the past three months to May 2017.

WisdomTree US SmallCap Dividend UCITS ETF (DESE)

This ETF weights stocks in its index by cash dividends paid rather than yield in order to avoid investing in stocks with falling share prices and unsustainable payouts. The WisdomTree US SmallCap Dividend index consists of the bottom 25 per cent of the market cap of the WisdomTree Dividend Index after the largest 300 companies are removed, and stocks are weighted by forecast cash dividends, based on the most recent dividend per share. DESE is one of the few small-cap income strategies around and has a good track record in performance and yield terms. In one year to May 2017 it generated among the best returns of any of the US equity ETFs on our 2016 list and it yields 3.6 per cent. It is not large in AUM terms, but has a reasonable ongoing charge of 0.38 per cent, has performed well and is a distinct and valuable strategy in an efficient market like the US.





Japanese equities remain among the cheapest in the developed world, both relative to their history and other markets. It is a good place to find equities for capital growth at good valuations and also has high income growth potential due to low payout ratios and high cash on balance sheets. Meanwhile, the country is undergoing structural change under Prime Minister Shinzo Abe, which should benefit investors. The exchange rate is key to Japan because it is one of the world’s major exporting economies and its major companies are hurt by a strengthening yen. We have included two sterling-hedged ETFs. However in the past year, sterling-hedged ETFs have underperformed unhedged.

Dropped from 2016 list

db x-trackers JPX-Nikkei 400 UCITS ETF (hedged to GBP) (XDNG)

We have replaced this with Lyxor JPX-Nikkei 400 UCITS ETF Daily Hedged GBP (JPXX), which is cheaper and larger.

UBS ETF – MSCI Japan Hedged to GBP UCITS ETF (UC62)

We have replaced this with db x-trackers MSCI Japan index UCITS ETF (XMJG), which is now cheaper by five basis points.

New list

iShares Core MSCI Japan IMI UCITS ETF (IJPA)

Last year we added this ETF as a broad, well-diversified option for Japan equity investors and it remains our first choice as a low-cost core Japan holding. Hortense Bioy says: “This is one of our favourite passive offerings in a category in which we think active managers have struggled to beat their benchmarks. The expansive market coverage offered by the MSCI Japan IMI Index means that this ETF provides one of the most representative cap-weighted exposures to Japanese equities.” The index covers around 1,200 Japanese companies, including large, mid and small-caps. Although the Topix is the most commonly cited Japanese benchmark, there is only one ETF tracking this, and it is far more expensive, is synthetically replicating and performance has been in line with our choice. With an ongoing charge of just 0.20 per cent, this is one of the cheapest Japan funds available to UK investors. Ben Seager-Scott says: “While there are lower-cost options tracking the Nikkei index, that index has a tilt towards technology names and I prefer the broader exposure of the MSCI Japan IMI index.”

NEW: db x-trackers MSCI Japan Index UICITS ETF (GBP Hedged) (XMJG)

This is an alternative core Japan option for investors who wish to hedge exposure. Ben Seager-Scott recommends switching former currency-hedged core choice UBS ETF MSCI Japan 100% Hedged to GBP (UC62) for XMJG following a five basis point fee cut. XMJG now costs 0.4 per cent and is the cheapest ETF tracking this core index. There is an opportunity cost involved in currency hedging and, in the past year, investors in unhedged Japanese equities have earned greater returns than those with hedged exposure. However there are many reasons to think the yen could weaken against sterling in the future. The Japanese government remains committed to a weaker yen, which benefits its exporting companies, and the dominant policy has been one of monetary easing. For that reason, we believe it still remains sensible to consider currency hedging in this market, particularly when the ongoing charge for doing so remains relatively small.

Lyxor JPX-Nikkei 400 UCITS ETF Daily Hedged (JPXX)

This alternative index for the Japanese market exploits the increased focus on corporate governance in Japan. Several of our panel recommended switching from our former choice, db x-trackers JPX Nikkei 400 UCITS ETF hedged to GBP (XDNG), into this Lyxor ETF. The latter is now cheaper than the former, with a 0.25 per cent ongoing charge, has higher AUM and hedges its currency exposure on a daily basis. The JPX Nikkei 400 index screens its 400 constituents by factors including return on equity, operating profit and corporate governance credentials. It enables investors to benefit from a push towards better corporate governance and shareholder values promoted in new legislation from Mr Abe. Those measures appear to be working. In 2016, 77.9 per cent of companies listed on the Tokyo Stock Exchange (TSE) had two or more independent directors, up from just 48.4 per cent in 2015, according to Jupiter Asset Management. Meanwhile, both dividends and share buybacks have increased markedly in the past two years. This is a sterling-hedged ETF.

NEW: iShares MSCI Japan Small Cap UCITS ETF (ISJP)

Two of our panel recommended adding a small-cap Japanese equity ETF in order to harness the higher growth potential of this segment of the market, which has performed strongly in recent years. Over three years this ETF has been the best performer in total returns out of a broad category of large and small-cap Japanese equity ETFs, according to Morningstar, and returns have easily outstripped the Topix index over three and five years. This ETF will be more volatile than a large-cap counterpart and is more expensive, with an ongoing charge of 0.58 per cent, but offers differentiated exposure to this market and potentially higher returns. It follows the MSCI Small Cap and physically tracks 894 equities, and has tracked well.



Our selection of European ETFs offers a comprehensive mix of European equity indices, which are highly varied and differ widely in terms of stock concentration, currency exposure and UK equity exposure. This year we have broadly maintained our 2016 list, but switched UBS MSCI EMU Hedged GBP UCITS ETF (UC60) for a lower-cost db x-trackers ETF with tighter spreads and a lower ongoing charge.

Dropped from 2016 list:


We have replaced this with db x-trackers MSCI EMU Index UCITS ETF (XD5S), which is now the cheapest sterling-hedged ETF tracking this index.

New list

db X-trackers Euro Stoxx 50 UCITS ETF (XESC)

This is one of the most popular European equity indices, giving investors access to the 50 largest blue-chip companies in the eurozone. This ETF is large and liquid and is the second-cheapest physically replicating ETF tracking this index. HSBC Euro Stoxx 50 UCITS ETF (H50E) is four basis points cheaper (at 0.05 per cent), but remains smaller by some margin and has tracked less well over one year. XESC is also more liquid, with more than 140,000 shares traded per day on average in the past three months – among the highest volume of any European equity ETF, according to Morningstar. Be aware that this index is a narrow way to play eurozone equities and is skewed towards large-caps, meaning it will underperform at times when small-cap stocks are rallying.

Vanguard FTSE Developed Europe ex UK (VERX)

This ETF is a solid low-cost core option for exposure to a broad range of European stocks. It tracks the FTSE Developed Europe index, which excludes the UK, and is weighted towards large developed countries such as France and Germany. James McManus says: “This is our preferred route to market for broad, large-cap European equity exposure. It is the cheapest in the market from an ongoing charge perspective and delivers the lowest total cost of ownership.” We have previously debated switching this exposure for an ETF tracking the MSCI Europe ex-UK index, which includes exposure to Scandinavia and Switzerland – however this index still underperforms the FTSE Developed Europe ex-UK over the short, medium and long term and we favour the FTSE Developed Europe ex-UK as a more diverse index.

NEW: db x-trackers MSCI EMU Index UCITS ETF (hedged to GBP) (XD5S)

Although this sterling hedged ETF tracking the MSCI EMU index is far smaller than our UBS MSCI EMU Hedged GBP UCITS ETF (UC60), it is cheaper and is likely to build up assets quickly as the new price leader. It was launched fairly recently, but has so far tracked the index well and has proved itself liquid enough to perform well on a tracking basis. James McManus says: “With a 0.25 per cent ongoing charge this ETF is three basis points cheaper than UC60 while typically exhibiting tighter spreads. Assets in the overall strategy now exceed E1.24bn (£1.07bn), meaning there is ample liquidity available.” Although the European Central Bank is no longer pursuing an aggressive quantitative easing (QE) programme as in recent years, sterling could still strengthen against the euro and investors may wish to eliminate the impact of currency from their returns. In that case, this ETF is a solid option.


This remains one of the cheapest routes to tracking value stocks in Europe, as well as the best performing. With bond yields rising across Europe and value-style investing returning to favour, it remains a good choice of factor in this region. The MSCI EMU Value index includes stocks selected for their price/earnings and price-to-book ratios and is designed to capture unloved stocks that have the potential for a re-rating. It has fewer stocks than the MSCI Europe Value index, but has outperformed significantly over three and five years. UB17 tracks 135 holdings and includes a large weighting towards financials and industrials stocks.

WisdomTree Europe SmallCap Dividend (DfE)

This ETF offers a low-cost route to equity income through small-cap European stocks, with an ongoing charge of 0.38 per cent, and weights stocks by forecast cash dividends in a bid to avoid yield traps. We considered switching this ETF to a non-income-focused small-cap ETF such as iShares MSCI EMU Small Cap UCITS ETF (CEUS). However, with a 0.58 per cent ongoing charge this was significantly more expensive than our current choice, and does not include the benefit of dividends. WisdomTree has also performed in line with rival small-cap strategies since launch, meaning there is little reason to move away from it at present.



Asian markets include Japan and China, and many developed Asian funds have very large weightings to Australia. By contrast, emerging Asian funds are skewed towards markets such as Taiwan and the Philippines. This year we have cut an expensive small-cap ETF and switched our income exposure for a cheaper alternative.

Dropped from 2016 list

db x-trackers MSCI AC Asia ex Japan High Dividend Yield (XAHG)

We replaced this ETF with SPDR S&P Pan Asia Dividend Aristocrats because of XADG’s high ongoing charge of 0.65 per cent, high swap fee of 0.38 per cent and relatively wide trading costs, due in part to its failure to gather a large volume of assets. We feel our new choice is a lower-cost strategy with better potential for dividend growth.

iShares MSCI AC Far East ex Japan SmallCap UCITS ETF GBP (ISFE)

This remains the only Asian small-cap option open to investors, but it has not outperformed the wider market over the long term and is relatively expensive, with an ongoing charge of 0.74 per cent.

db x-trackers FTSE China 50 UCITS ETF (XX25)

Although this fund has been a strong performer, we have decided to broaden our offshore China share selection. We have replaced it with a broader MSCI China index ETF.

New list

NEW: SPDR S&P Pan Asia Dividend Aristocrats UCITS ETF (PADV)

The yield on this ETF is lower than the ETF it has replaced – around 2 per cent – but SPDR S&P Pan Asia Dividend Aristocrats is far cheaper, has delivered better total returns over the long term and has a greater focus on dividend sustainability than rival Asian income ETFs. SPDR only tracks stocks within the S&P Pan Asia Broad Market Index (BMI) that have increased their dividends each year for seven consecutive years or more. It means that investors are likely to be exposed to more sustainable dividend payers that are likely to deliver steadier income growth in the future. PADV’s portfolio has better historical and long-term projected earnings growth than db x-trackers MSCI AC Asia ex Japan High Dividend Yield (long-term projected earnings growth of PADV’s portfolio currently stands at 7.77 per cent, compared with just over 5 per cent for XAHG). One of our panel likes iShares Asia Pacific Dividend UCITS ETF (IAPD), but this ETF, which tracks 30 of the highest-yielding stocks within the wider market, has a higher ongoing charge and its returns have been more volatile over the long term.

Vanguard FTSE Developed Asia ex Japan UCITS ETF (VAPX)

There isn’t a wealth of ETFs tracking developed Asia indices. This is the only route to the FTSE Developed Asia index, which is a broad and well-diversified basket of developed Asian equities. It is very low-cost at just 0.22 per cent and, unlike the MSCI AC Asia Pacific ex Japan index, includes exposure to Korea. Over the long term, it has not performed as strongly as the MSCI AC Asia Pacific ex Japan index. However, it is 40 per cent cheaper than the ETF tracking that index, which has an ongoing charge of over 0.60 per cent, and VAPX is broader, with more than 300 stocks compared with 150 in the MSCI Pacific ex Japan index.

iShares MSCI China A (IASH)

China is a huge market and ETFs are one of the most direct ways for investors to access the highly restricted domestic A-share market. It is home to some exciting stocks, but also highly volatile as it is dominated by private Chinese investors. There are several indices you can use to track A-shares, including the CSI 300, an index of 300 stocks from both the Shanghai and Shenzhen stock exchanges, the MSCI China A index and MSCI China IMI index. Of those, the MSCI China A IMI has the greatest number of stocks (more than 2,000) and has delivered the best returns over five years. However we are sticking with iShares MSCI China A because it tracks the least volatile A-Share index, the MSCI China A, and has a reasonable ongoing charge of 0.65 per cent, making it the cheapest ETF to track this index. Be aware that if you already hold Asian equity ETFs and/ or emerging market equities you are likely to have exposure to China, although this is likely through Hong-Kong-listed H shares as opposed to domestic Chinese A-shares.


Last year we introduced db x-trackers FTSE China 50 UCITS ETF (XX25), an ETF tracking an index of 50 Hong-Kong listed H-share stocks. This year we have replaced that with lower-cost, broader H-share exposure via HSBC MSCI China UCITS ETF, which tracks the MSCI China index. Investors who feel less comfortable with the volatility of domestic A-shares might prefer to invest in Chinese shares traded on the offshore Hong Kong market, and the MSCI China covers 151 Chinese equities listed in Hong Kong, covering the top 85 per cent of the investible market. This ETF is the cheapest on the London Stock Exchange tracking this index, at 0.60 per cent, and is more liquid than rival ETFs tracking this index, with a tighter bid-offer spread and almost double the average trading volume of db-x trackers MSCI China UCITS ETF (XCX6) over the month to May 2017. This index is concentrated in the IT sector, which includes well-known stocks Tencent and Alibaba, and currently around 20 per cent of the portfolio is invested in IT stocks.





Emerging markets are high-risk, but they also offer the potential for far higher growth than developed markets and are generally cheaper, too. Last year was a strong year across the board as emerging markets rallied following several years of negative sentiment. But with the outlook for countries such as India improving and external debt levels falling in many regions, the outlook remains strong. Currency will have a large impact on your returns in this region, though, which makes this a volatile area. This year we have dropped our Brazil ETF as it has rallied so strongly.

Dropped from 2016 selection


Brazil was a stellar performer in 2016 and this ETF returned 54.6 per cent over one year to 5 May 2017. That means valuations are no longer as compelling and we think it is time to take profit on this market, which is facing political bumps ahead too with new corruption allegations facing acting president Michael Temer. We still like this ETF, though.

New list

iShares Core MSCI Emerging Markets IMI UCITS ETF (EMIM)

Our panel overwhelmingly recommended keeping this low-cost, large and liquid ETF, which tracks the MSCI Emerging Markets IMI index – the broadest index of emerging markets stocks. Alan Miller says: “It is very hard to beat this ETF, which charges just 0.25 per cent and invests in a broad range of small, mid and large-cap companies from emerging markets, rather than just large-caps, and is very well spread, with 12,895 constituents at present.” Oliver Smith says: “This stands out as a low-cost way of getting exposure to the asset class, with high liquidity and a bid-ask spread of just 0.09 per cent.” This index has a large weighting to China – at 26 per cent – but less so than comparable rival indices.

iShares Edge MSCI Emerging Markets Minimum Volatility UCITS ETF (EMV)

Emerging markets can be volatile regions to invest in and a minimum volatility ETF is a good way to smooth out your returns. This ETF offers a solid strategy and has actually outperformed broader emerging markets ETFs over the long term, with a reasonable ongoing charge of 0.40 per cent. It tracks the MSCI Emerging Markets Minimum Volatility index, which takes the combination of stocks from the MSCI Emerging Markets index calculated to deliver the lowest absolute risk. Unlike other minimum volatility indices, this strategy focuses on the risk relationship between stocks, as well as looking at the risk attached to individual stocks and limits unintended country, sector and style bets. According to Morningstar, over the medium term it has delivered outperformance against the MSCI Emerging Markets index with lower volatility, and has experienced less dramatic drawdowns than the parent index. This ETF will lag during bull markets, but has held up in bear markets. It also has a low annual index turnover, designed to reduce trading costs.

SPDR MSCI Emerging Markets Small Cap UCITS ETF (EMSM)

Of the two ETFs tracking this small-cap index, SPDR remains substantially cheaper than iShares EM MSCI Small Cap UCITS ETF (SEMS) - 0.55 per cent compared with 0.74 per cent – and over three years is the second-best emerging market equity ETF in total return terms, according to Morningstar. Although it remains relatively small in size, with AUM of just under £40m, it is liquid enough and remains a good option for access to more than 1,800 fast-growth nations, including South Korea, India and Taiwan. This is a high-risk approach to emerging market equities, but over the long term the MSCI Emerging Markets Small Cap index has beaten the MSCI Emerging Markets index.

db x-trackers MSCI India Index UCITS ETF (XCX5)

Although investing in single countries via ETFs is a high-risk approach, members of our panel felt that India remained a compelling enough market to warrant this. The country is the fastest-growing G20 country, is set to become the world’s youngest country by 2020 and is midway through a swath of political business-friendly reforms enacted by prime minister Narendra Modi. There are no physical ETFs tracking the MSCI India index and so this is a synthetically replicating ETF, which does introduce counterparty risk. However it has also tracked well and is good value despite a fairly high ongoing charge of 0.75 per cent.



There is now little point in paying an active manager for core exposure to government bonds. With yields sitting at record lows and the market having been driven by central bank activity, this is not an area where active managers are able to add value. The main concerns for bonds today are the impact of higher inflation – which eats in to the real income of bonds – and higher interest rates, which erode their value. For that reason we have cut iShares’ inflation-linked bond ETF from the list. We feel there is too much interest rate risk accompanying it and inflation-linked bonds are no longer good value now that higher inflation expectations have been priced in to the market. We have also introduced short-dated US Treasuries, and made one switch for the new market leader on price in short-dated gilts.

Dropped from 2016 list

iShares £ Index-linked gilts UCITS ETF (INXG)

We feel there is better value to be had in other segments of the bond market and this ETF’s fairly high average duration means it could be susceptible if interest rates rise. Inflation expectations are also already high, meaning that inflation-linked bonds are not good value today.

SPDR Barclays 0-5 yr Gilts UCITS ETF (GLTS)

We have replaced this with a far cheaper option from Lyxor.

New list

Lyxor FTSE Actuaries UK Gilts UCITS ETF (GILS)

Our panel overwhelmingly recommended holding on to this core gilts ETF, which offers low-cost exposure to the broad gilt market. When we added this ETF last year it had recently switched from synthetic to physical exposure and amended its index in order to track the FTSE Actuaries UK Gilts Index. Since then, assets have grown and its AUM now stands at £117m, meaning spreads have narrowed too. Meanwhile, with an ongoing charge of 0.07 per cent it remains by far the cheapest route for gilt exposure in the European ETF universe. This ETF spans the gilt market and so will be affected if interest rates rise. But as a broad core gilt ETF it is very good value.

NEW: Lyxor FTSE Actuaries UK Gilts 0-5yr (GIL5)

This ETF was launched last year and is now the clear market leader for ETFs tracking short-dated gilts. James McManus says: “With an ongoing charge of 0.07 per cent this strategy tracks the same index as [our 2016 choice] IGLS at nearly a third of the cost, and provides an alternative exposure to Lyxor FTSE Actuaries UK Gilts UCITS ETF at less than half the fee level.” The ETF is currently small, but is likely to gather funds quickly due to its low ongoing charge. It tracks the FTSE Actuaries UK Gilts 0-5 year index, made up of 14 bonds maturing between zero and five years, with the majority maturing between three and five years, meaning investors are protected if interest rates rise. The defensive stance means that the yield on this ETF is low, but on balance we believe the shorter part of the yield curve is a safer place to be.

NEW: Lyxor iBoxx $ Treasuries 1-3 yr UCITS ETF (U13G)

Ben Seager-Scott and James McManus recommend diversifying UK gilt exposure with a US Treasury ETF and argue for sticking to short-dated bonds in order to minimise the risk of capital loss if interest rates rise. Mr Seager-Scott says: “US government bonds look less unattractive than [other traditional sovereign bonds] as they have positive real yields, but the long end of the yield curve looks vulnerable.” Lyxor’s push on fixed-income pricing means that this is the cheapest product in this market, with an ongoing charge of 0.07 per cent.

iShares Global Government Bond UCITS ETF (IGLO)

For investors who do not want to take targeted exposure to the government bond market, this ETF offers straightforward passive exposure to the major global developed sovereign bond issuers and is a cheap ETF that has tracked efficiently. The ETF tracks the Citigroup G7 index, comprised of bonds from the G7 nations, including the US, Japan, Germany, France, the UK, Italy and Canada. Although we feel this ETF is the best for broad developed bond exposure, this may be an area where an active manager could add value due to the broad spread of the index and the potential for pricing anomalies. The bonds in the index are also likely to be pulled in different directions by divergent monetary policy. However this ETF is a good core holding for investors who want to globally diversify their bond exposure and is a good way to hold a spread of bonds for a low price tag.



This year we have broken out high-yield and emerging market bonds into a separate category, in line with a recommendation from several members of our panel. Both emerging market bonds and high-yield corporate bonds are undeniably high-risk and these are areas traditionally associated with active managers, who can pick and choose the bonds they buy. However this is an area of soaring demand among ETF investors and these bonds are the only source of high income at good valuations in a fixed-income market dominated by low or negative yields. Emerging market debt ETFs offer yields far higher than can be found on developed market bonds, despite fairly low historic default rates. High-yield bonds are looking more expensive than last year, but remain on higher yields than corporate credit further up the quality scale.

Dropped from 2016 selection

Lombard Odier IM Emerging Market Local Government Bond Fundamental GO UCITS ETF (LOCG)

We still like this smart-beta approach to bond ETFs, which weights issuers by market cap rather than levels of indebtedness. But this year we have chosen to replace it with an alternative emerging market bond ETF that has a higher yield and is lower-cost.

PIMCO Short Term High Yield Corporate Bond ETF (STHY)

We have replaced this with an alternative US high-yield ETF recommended by three of our panel.

New list

NEW: UBS ETF - Barclays USD Emerging Markets Sovereign GBP Hedged UCITS ETF (SBEG)

Two of our panel recommended adding this ETF, which is the only dollar-denominated emerging market debt ETF with a sterling-hedged share class. Instead of weighting issuers by outstanding debt, this ETF index caps each country at 3 per cent, making it a more conservative way to approach emerging market bonds than a straightforward market-cap index. This ETF offers broadly diversified access to the sovereign debt of more than 60 emerging market countries, has a shorter average duration and maturity than comparable dollar-denominated debt indices such as the JPMorgan Emerging Market Bond Index and a high yield of almost 5 per cent. That is a significant premium over developed market debt, and sovereign default risk could be lower than perceived – there have been only 17 sovereign defaults by emerging market countries in the past 17 years. One risk for this market is the impact of US policy – the level of dollar-denominated debt held by emerging markets means it is vulnerable to dollar fluctuations – and protectionist policy from the US could hurt these markets. However be aware that this is a high-risk strategy and this ETF remains small in AUM, making it less liquid than plain vanilla market-cap peers.

NEW: SPDR Barclays EM Local Bond UCITS ETF (EMDL)

Investors in emerging market debt must choose between investing in hard currency bonds denominated in US dollars or local currency debt. Local currency bonds are traditionally seen as higher-risk due to the more volatile nature of emerging market currencies, but have higher yields as a result. And this SPDR Barclays EM Local Bond UCITS ETF (EMDL) tracks the Barclays Emerging Markets Local Currency Liquid Government Index, designed to give exposure to more liquid local currency markets. Morningstar says this is a better index for this exposure than broader market-cap weighted choices. Although there is a large iShares ETF tracking local emerging market bonds for a lower ongoing charge, this SPDR ETF (with an ongoing charge of 0.55 per cent) has been less volatile and, due to the way in which the fund and the index it tracks are taxed, has better tracking.

NEW: iShares Fallen Angels High Yield Corporate Bond UCITS ETF (WING)

Three of our panel recommended adding this new ETF to our selection, which is designed to capture high-yield bonds with higher credit quality than the wider market and at better valuations. Fallen angels are bonds that have been downgraded from investment-grade and as a result tend to be oversold by institutional managers who no longer want to hold them. The idea behind this strategy is that by grouping together the fallen angels, investors end up with a diversified portfolio of developed market high-yield bonds that have better fundamentals than other high-yield bonds in the market. Lynn Hutchinson says: “The ongoing charge is 0.50 per cent and the product was launched in June 2016. AUM now stands at over £200m, while the bid-offer spread is reasonable at 39 basis points.” PowerShares has an alternative ETF in this market, but spreads are wider, it holds fewer bonds and the AUM figure is far smaller.

iShares Euro High Yield Corporate Bond UCITS ETF (SHYG)

This ETF offers exposure to the European high-yield market, which is less concentrated in energy stocks than high-yielding bonds in the US, but also comes with slightly lower yield as a result. Compared with the comparable US high-yield iShares ETF, SHYG has a far greater weighting in consumer cyclical and capital goods, while over 16 per cent of iShares $ High Yield Corporate Bond UCITS ETF (SHYU) is invested in energy stocks. Of the limited selection of ETFs tracking the European high-yield market, this is the best in AUM terms and is large and liquid. The average maturity of the portfolio is three years and the effective duration of the bonds is 2.83, meaning it takes less interest rate risk than comparable indices with longer durations. The majority of the bonds in the index are BB rated but this portfolio does include subordinated debt and it remains a high-risk area.



Many UK investors do not have enough exposure to overseas equities in their portfolios and global equities are a particularly good area to access via an ETF, which can add a large number of global stocks to your portfolio for a low price tag. You may only need one or two broad funds to form the base of a well-diversified equity portfolio and there are a range of options for investors keen to add elements of smart-beta or volatility protection to their overseas stock exposure too. We have chosen a selection of global ETFs in order to provide core building blocks, as well as some ETFs that could add value as satellite holdings. We have only made one switch in this category this year.

Dropped from 2016 selection

db x-trackers Stoxx Global Select Dividend 100 UCITS ETF (XGSD)

We have replaced this with a lower-cost alternative income ETF, which has greater potential for income growth and more of a focus on income sustainability.

New list

NEW: SPDR S&P Global Dividend UCITS ETF (GBDV)

This year we have switched our global income choice from db x-trackers Stoxx Global Select Dividend UCITS ETF (XGSD) into SPDR S&P Global Dividend UCITS ETF (GBDV). With an ongoing charge of 0.45 per cent the SPDR product is cheaper and trumps its rival in both total returns and dividend yield growth over three and five years. It is also a physically replicating ETF, unlike XGSD, so does not include swap fees. SPDR selects only global stocks that have increased their dividend for at least 10 years, so although its yield is slightly lower than our previous choice, at 3.6 per cent, it is a clear winner when it comes to dividend growth. Over five years it has grown its payout by more than 15 per cent, while db x-trackers has cut its dividend. SPDR is also larger and more liquid, with a tighter bid-offer spread and higher trading volumes. In the past three months it has traded an average of 23,700 shares a day, compared with just 1,500 for XGDD, making the former far more liquid. The index it tracks screens the stocks it holds for the quality, liquidity and sustainability of dividends. This ETF pays quarterly dividends.

SPDR MSCI World Small Cap (WOSC)

This is the only global small-cap ETF tracking the MSCI World Small Cap index and is among the best performing and best tracking of any global equity ETF over three years to May 2017, according to Morningstar. Global small-caps are a time-intensive area to research and this ETF saves investors selecting individual stocks or small-cap regional ETFs, making it a good value diversifier. The index includes more than 1,800 holdings, with a large chunk in the US, and a broad spread of sector exposures. Small-caps are likely to experience faster growth than large-caps and the MSCI World Small Cap index has outperformed the MSCI World index over three, five and 10 years, having returned 163 per cent compared with 125.8 per cent over 10 years to 16 May 2017. However the index has been more volatile too. This ETF has an ongoing charge of 0.45 per cent.

iShares Edge MSCI World Minimum Volatility UCITS ETF (MVOL)

Minimum volatility ETFs have proved one of the most successful forms of smart-beta ETFs in recent years, and in many cases have delivered greater returns than their broad market peers over the long run by losing less in down markets. Over five years iShares MSCI World Minimum Volatility has outperformed its comparable ETF, the iShares MSCI World UCITS ETF by more than 10 per cent, although it has also not taken part in any MSCI World index rallies. This ETF is designed to deliver less volatile returns than the MSCI World by selecting stocks from the MSCI World based on estimated risk profile and analysing the correlations between index constituents. This is a physically replicating ETF with an ongoing charge of just 0.30 per cent and is among the largest and most liquid of any global equity ETF, with more than 95,000 shares trading daily on average over the past three months.


Last year we replaced iShares Core MSCI World ETF (SWDA) with this cheaper ETF tracking the same index. Since we added it to the selection it has grown in size and it remains the market leader in price, with an ongoing charge of just 0.15 per cent. Although HMWO remains smaller than the comparable iShares’ ETF, its bid-ask spread is the same and the number of shares traded daily on average is similar, meaning HMWO remains liquid and efficient in both implicit and explicit costs. This is one of two broad market-cap global ETFs in our selection, but we feel both deserve a place as distinct and effective ways to track the global market. At the time of writing the index tracks 1,648 holdings from 23 developed countries, including the UK. It is slightly less global than our other ETF, Vanguard FTSE All World, as it excludes frontier and developed market stocks.

Vanguard FTSE All-World ETF (VWRL)

This is one of two ETFs tracking this truly global equity index and is the clear leader in price, size and tracking. This index is also the most diverse, with more than 3,000 constituents covering 90-95 per cent of the investible market capitalisation. The index includes developed and emerging markets and represents the performance of both large and mid-cap stocks from all major markets and over 10 years has beaten the MSCI AC World and MSCI World in returns. Vanguard FTSE All-World is among the cheapest global ETFs on the market, with an ongoing charge of 0.25 per cent and ranks in the top 10 global equity ETFs for tracking over three years to May 2017 according to Morningstar and is among the largest global equity ETFs, making it a liquid, low-cost ETF. Be aware that the UK accounts for around 6 per cent of this index.



This year we have added an ethical ETF category due to the rapid innovation in this market and the stellar performance of some of the ETFs within it. You may think you are not interested in ethical investing, but in many cases these ETFs offer better returns and a better balance of stocks and sectors as well as better ethical credentials.

UBS ETF – MSCI World Socially Responsible UCITS ETF (UC44)

This is a core ethical holding with a lower charge than comparable global ethical ETFs, at 0.38 per cent, and a longer track record. It is ideal for investors who want to limit their exposure to companies engaging in gambling, alcohol and tobacco and other companies with negative social impacts. UC44 tracks the MSCI World Socially Responsible Investment benchmark, which prioritises companies with strong sustainability profiles and good environmental and social records, and excludes companies that fall foul of its value screens. Companies are monitored and given a score for their environmental and social impact – those that maintain high scores stay in the index and those with particularly good scores from the wider MSCI world index are added. Among the global sustainability ETFs listed on the London Stock Exchange (LSE), this has also performed better on a calendar year basis than rivals and delivered returns closer to the MSCI World. Over five years, UBS has returned 106 per cent compared with 113 per cent for the MSCI World (to 17 May 2017).

UBS ETF - MSCI EMU Socially Responsible UCITS ETF (UB39)

This ethical ETF has among the longest track record of any ethical ETF and it has been a solid performer, easily beating its comparative plain vanilla index over all time periods. Over three years to May 2017 the MSCI EMU SRI index has returned over 50 per cent compared with just over 37 per cent for the MSCI EMU index. UBS EMU is also the cheapest in UBS’s socially responsible range, with an ongoing charge of 0.28 per cent. It has 56 holdings and its spread of sectors and countries is similar to the parent index, meaning the ethical overlay has not resulted in unintended large sector and country bets. MSCI’s socially responsible indices aim to reflect the sector weights of their parent indices in order to avoid introducing extra risk. Companies that engage extensively in alcohol, gambling, tobacco and defence industries are excluded from the index. This ETF also pays out income and has a current yield of 3 per cent.





Last year we overhauled this category and introduced a raft of single-commodity exchange traded commodities (ETCs). ETCs are the most direct route to access the price of commodities, rather than buying a group of shares in commodity-related companies, and this remains our preferred approach in this category – the palladium ETC we introduced last year has performed particularly strongly. However we are cutting our oil ETC from the list due to the structural issue of oil ETCs, which means that when the oil price rallies, your returns suffer. We have also introduced one new broad-brush commodities fund as it is highly cost-effective and we like the index.

Dropped from 2016 selection


Several of our panel recommended we drop this ETC because of the structural issue of oil ETCs. These track the spot price of oil by buying futures contracts and when the oil price is rising the ETC is forced to sell expiring contracts for less than it pays for new ones. This means that, although the WTI oil spot price recovered in 2016, this ETC has lost money over one year (to May 2017).

ETFS Physical Platinum ETC (PHPT)

We feel that the outlook for palladium remains more compelling than platinum, which has so far failed to recover from an industrial metal bear market.

NEW: Source Bloomberg Commodity UCITS ETF (CMOD)

This ETF caused a stir when it launched in January 2017, quickly becoming the fastest-growing European ETF of the past five years, and comes recommended by our panel as a cost-effective way to access a broad commodities index. With an ongoing charge of 0.19 per cent and 0.21 per cent swap fee, the ETF undercuts all commodities ETFs on the market and has already built up AUM of £1bn, making it one of the largest commodity ETFs on the LSE, as well as one of the most regularly traded. More than 400,000 shares a day have traded on average over the past three months to May 2017, making it a highly liquid fund. However there are risks associated with this strategy. This ETF invests in futures contracts, which are affected by contango if the price of those contracts diverges markedly from the spot price. This ETF, like most commodity ETPs, is a synthetic ETF too, so involves counterparty risk and swap fees.

Source Physical Gold ETC (SGLD)

Although iShares Physical Gold (SGLN) is now the cheapest physical gold ETC on the market, SGLD remains the better choice in our view. It has a larger AUM of £3.9bn, is more liquid – with higher average trading volumes – and has a far tighter bid-offer spread than iShares, as well as lower short-term tracking error. Gold acts as a portfolio diversifier, as well as a potential hedge against inflation. It tends to perform strongly when investors are nervous about the economic outlook. This ETC delivers the return of the London Gold Market PM Fixing Price in dollars. Each gold P-ETC is a certificate collateralised with gold bullion held in JPMorgan Chase’s London vaults.

Source Physical Silver P-ETC (SSLV)

Silver is a precious metal but also has industrial uses and can act as a hedge against inflation. In contrast to gold, which trades like a currency, the physical supply and demand for silver drives its price. Silver is used in jewellery, but also in LED components, parts of engines and even appears in personal deodorant. This ETC is a good way to access the metal, with a low ongoing charge of 0.39 per cent, and is collateralised with silver bullion held in JPMorgan Chase’s London vault.

ETFS Physical Palladium (PHPD)

Of the physical ETCs tracking this metal on the LSE, this is the largest and most liquid. Palladium rallied strongly throughout 2016, but supply and demand dynamics mean it still looks appealing. One of the most common uses of palladium is to reduce fumes from petrol-powered vehicles through the use of catalytic converters. Platinum is also used for that purpose, but for the smaller diesel car market. And unlike platinum, analysts say palladium is on track to record another deficit in 2017, pushing up its price. However, this is a volatile and very high-risk market. Slowing growth in China would negatively affect returns, while a strong dollar and launch of new electric cars are risks too. The metal is also highly volatile and more cyclical than other precious metals. This ETC is backed by allocated metal held in a Zurich vault and has an ongoing charge of 0.49 per cent.



Corporate bonds offer a higher yield than government debt due to their slightly higher risk profile, but default risk remains below the high-yield segment of the market. These ETFs offer low-cost core exposure to sterling investment-grade bonds and we include one global corporate bond ETF too.

iShares £ Corporate Bond 0-5yr UCITS ETF (IS15)

This ETF offers exposure to short-dated corporate bonds, limiting interest rate risk, and is far larger and more liquid than rival ETFs in this category. Investment-grade corporate bonds offer a higher yield than government debt with lower risk than other segments of the bond market, and this remains a good core ETF for this market, with a low ongoing charge of 0.20 per cent. It tracks the Markit iBoxx GBP Corporates 0-5 Index, where the majority of bonds are BBB-rated but more than 45 per cent are rated AA or AAA. Ben Seager-Scott recommends this ETF and says: “Corporate bonds, particularly investment-grade, appear more attractive than sovereigns right now, but I’m still wary on the asset class. I favour lower duration, where the pull-to-par effect (where the price of a bond moves towards its face value as time passes) can potentially limit some of the downside.” Oliver Smith says: “This ETF offers a roughly 1 per cent yield pick-up on UK gilts with very good credit quality in the underlying.”

iShares Core £ Corporate Bond UCITS ETF (SLXX)

This ETF is a longer-duration play on the sterling corporate bond market and so has the potential for capital loss if interest rates rise. However, it is also a good core holding for exposure to the most liquid area of the sterling corporate bond market and, according to Morningstar, has demonstrated impressive tracking. The ETF tracks the performance of the Markit iBoxx Liquid Corporates Long-Dated bond index, which offers exposure to the 40 largest and most liquid sterling-denominated corporate bonds with investment-grade rating. Only bonds with a minimum maturity of 1.5 years and a minimum amount outstanding of £250m are included in the index. Ben Seager-Scott says: “Those willing to take on higher duration, and the potential higher return that comes with it, are well suited with iShares Core £ Corporate Bond UCITS ETF.”

iShares Global Corporate Bond UCITS ETF (CRPS)

This ETF offers broad exposure to the global corporate bond market for a low ongoing charge of 0.2 per cent, making it a good core fixed-income holding. 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 one year. It has an effective maturity of 8.88 years and effective duration of 6.39 years, meaning it is vulnerable to interest rate rises. Investors should also consider that this is a broad index and monetary policy is likely to be divergent across the countries issuing these bonds.