Around the world in ETFs: UK, Europe and Japan

UK markets have achieved big returns in recent years but that is yet to translate into demand for the funds that fish there. Investors have spent much of the last decade pulling their money from such portfolios.

When it comes to the exchange-traded fund (ETF), we see a similar trend.

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The list of bestselling ETFs among ii customers in October shows them targeting seemingly more glamorous areas, from chasing the precious metals boom via names such as iShares Physical Gold ETC GBP (LSE:SGLN) to tracking the tech-heavy Nasdaq 100, or using conventional US and global trackers.

The humble FTSE 100 tracker is absent from this list, and appears just once in our latest Top 50 Fund Index.

But it’s no slouch. The iShares Core FTSE 100 ETF GBP Dist (LSE:ISF) has delivered a 23% total return over the 12 months to 7 November 2025 and has plenty to recommend it, from a low fee (0.07%) to a still reasonable yield of around 3% over the last year. But those wanting to pick up domestic shares via an ETF should remember some of its quirks.

This piece, the third in our “Around the world in ETFs” series (see previous articles below), also looks at ETFs focused on Japan and Europe, which come with plenty of idiosyncrasies.

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UK ETFs

Readers might be especially familiar with the make-up of the FTSE 100, but it’s worth covering some basics.

On a sector basis there’s a reason some investors think of it as an ex-growth market: financials make up a quarter of the fund, with industrials on 15.5% and consumer staples on roughly the same. There’s also a decent slug of exposure to healthcare, and to energy and materials companies.

What this means is that the UK’s main indices have a particular bias towards both cyclical and value stocks.

Another characteristic of the index is its relatively smaller exposure towards technology companies.

Much is made of how concentrated the US market is, but a FTSE 100 tracker, such as iShares Core FTSE 100 ETF, also comes with a punchy level of stock-specific risk.

AstraZeneca (LSE:AZN) accounts for around 8% of this fund, with HSBC Holdings (LSE:HSBA) and Shell (LSE:SHEL) both on at least 7%. Unilever (LSE:ULVR) is on a 4.7% weighting, with recovery story Rolls-Royce Holdings (LSE:RR.) on 4.1%.

Source: iShares, as at 07/11/2025. 

Different share classes are available on ETFs, with accumulation shares reinvesting any dividends and distribution shares paying these out.

Perhaps unsurprisingly the only sterling share class on this ETF is a distributing one (with two accumulation share classes that hedge back to different currencies). That’s useful for income investors, although some might prefer to have the cash reinvested and compound their returns over time.

The FTSE 100 is, of course, not the only game in town, with some favouring the FTSE All-Share as a broader source of exposure to UK-listed shares.

There hasn’t always been much choice here but the SPDR FTSE UK All Share ETF Acc (LSE:FTAL) exists, as does the Amundi UK Equity All Cap ETF (LSE:LCUK), which seeks to give broad UK exposure via a bespoke index.

These two have had very similar performance over the years, but it’s worth noting that they are heavily exposed to the FTSE 100 and behave very much in line with that market due to the sheer size of the top 100 companies. Investors get similar exposures with, for example, AstraZeneca on an almost 7% weighting.

This matters because investors might assume an All-Share tracker is giving them good exposure to mid-cap shares. But to capture that part of the market they would be better off using a FTSE 250 ETF such as the Vanguard FTSE 250 UCITS ETF (LSE:VMID), and pairing it with a FTSE 100 or FTSE All-Share fund.

The FTSE 250 index is the next largest 250 companies on the London Stock Exchange after those in the FTSE 100. It is not the FTSE 100, plus an extra 150 companies.

Source: FE Analytics, 07/11/2025. Past performance is not a guide to future performance.

Mid-cap shares have not recovered quite so strongly as large caps so far, and a fund such as VMID would do well to capture a rebound.

It would also capture a sustained recovery for the investment trust sector. The FTSE 250 is home to many such vehicles, and both Tritax Big Box Ord (LSE:BBOX) and JPMorgan Global Growth & Income Ord (LSE:JGGI) sat among VMID’s top holdings at the end of September.

For now, investors might be tempted by active UK funds, which are faring especially well. We recently noted that names such as Artemis UK Select I Acc (B2PLJG0) have beaten the FTSE All-Share with a good level of consistency.

Europe

Only two European equity funds sit in our Top 50 Fund Index and both, Artemis SmartGARP European Eq I Acc GBP and JPMorgan European Growth & Income Ord (LSE:JEGI), are active names with a decent record of outperformance. But ETFs can give some simple exposure to a region that has roared back to life.

European tracker funds don’t tend to experience the issues with market concentration that we see in US, global and even UK funds.

The Vanguard FTSE Developed Europe ETFEURAcc GBP (LSE:VEUA), a large and liquid option with a low yearly 0.1% fee, has some modest position sizes with top name, ASML Holding NV (EURONEXT:ASML), on 3.8%.

It’s only the top five holdings that have a weighting of more than 2% each. This helps to spread out the risk but also makes it easier for stock pickers to have more in their favourite stocks than the market.

Source: Vanguard, 30/09/2025.

In terms of broader exposure, the fund has lots in financials and industrials, and on a geographic basis it has big allocations to France (including names such as Roche), Germany (including SAP) and Switzerland (including Nestle). Overall, it tracks just over 400 companies.

This tends to be where your specific choice of Europe ETF makes a big difference.

Note that plenty of European Monetary Union (EMU) ETFs exist, such as the iShares Core MSCI EMU UCITS ETF EUR Acc GBP (LSE:CEU1) and that their focus on the EMU results in the exclusion of Switzerland from the fund.

That means names such as Nestle are absent and the fund is more concentrated. Note its 5.9% position in ASML, or the fact that it has bigger allocations to France and Germany than the Vanguard fund.

The Vanguard fund has returned 67.6% over the five years to 7 November 2025, while the iShares fund has returned 82.7%.

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It’s also worth remembering that Europe doesn’t hold up terribly on the dividends front. The income share class of the Vanguard ETF had a 2.8% yield at the end of September.

For those who would prefer a more concentrated approach, there are some tracker funds that follow the up and down fortunes of the EURO STOXX 50 index.

This features the 50 biggest stocks from the 11 countries in the eurozone - those that use the euro. As a result, the index is dominated by France (34.3%) and Germany (29.6%). Options include the iShares Core EURO STOXX 50 ETF EUR Acc GBP (LSE:CS51) and Xtrackers Euro Stoxx 50 ETF 1C GBP (LSE:XESC).

Japan

Much like Europe (and the UK), Japan has offered some very good returns in recent years, even if US shares have tended to hog the limelight. And as with Europe, different ETFs give very different exposures.

Japan has a couple of prominent indices, the Nikkei 225 and the Topix, and these differ in interesting ways.

The Nikkei 225, unusually, is a price-weighted index, meaning companies with higher valuations get bigger weightings in the market. The Topix (and MSCI Japan) follows the market cap approach used more widely, where companies get a weighting in an index based on their market cap.

Therefore, the likes of the iShares MSCI Japan ETF USD Dist GBP (LSE:IJPN) and the Amundi Japan Topix II ETF Dist EUR GBP (LSE:JPNL) are very similar when it comes to company and sector weightings, and perform very similarly.

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But the iShares Nikkei 225 ETF JPY Acc GBP (LSE:CNKY) looks markedly different when it comes to top holdings, with Advantest on 10.5%, Fast Retailing Co Ltd Shs Unsponsored Hong Kong Depositary Receipt Repr 1/100th Sh (SEHK:6288) on 9% and Softbank Group on 8.6%.

In performance terms, the two different options have looked similar as of late: the iShares MSCI Japan ETF has returned 21.1% over the 12 months to 7 November 2025, with the Nikkei 225 option on 27.6%.

The Nikkei 225 fund might generally have more concentration, and potentially more of a momentum style, given its focus on highly valued companies.

But high valuations can be a risk, too. We see some of this play out with the Nikkei 225 fund performing very strongly in 2025, but suffering severely in the growth sell-off of 2022.

There is also the lesser-known JPX-Nikkei 400 index.

This index is slightly different in that inclusion depends on several qualitative factors, most notably relating to the corporate governance policies of companies. The index can be tracked through Invesco JPX-Nikkei 400 ETF GBP (LSE:S400).