In this article, we will take a look at the 12 best European ETFs to buy. If you want to skip our discussion on the European ETF industry, you can check out the 5 Best European ETFs to Buy.
The European Central Bank (ECB) is one of the few central banks in the developed world that is behind the curve on raising interest rates. The inflation rate in the 20-member Eurozone stood at 5.2% YoY in August 2023, surpassing the ECB's benchmark interest rate, which reached an all-time high of 4% in mid-September. In contrast, the Federal Reserve in the US has maintained the benchmark interest rate in the range of 5.25% to 5.50%, with the inflation rate being around 3.7%. Unlike the Federal Reserve, the ECB cannot be aggressive in increasing the benchmark interest rate as it hampers the economic growth outlook due to the cost of borrowing rising. Germany, often recognized as the economic powerhouse of Europe, has already seen its economy stagnate during Q2 2023. The German economy entered into a mild recession during winter last year as the GDP shrank by 0.4% during the last quarter of 2022 and 0.1% during the first quarter of 2023. Positive GDP growth numbers from the second biggest economy in the Eurozone, France, and the fourth biggest economy, Spain, are expected to play a favorable role in the EU, reporting GDP growth of 0.4% during Q2 2023. Given these economic conditions, there is now a strong belief that the ECB will halt any further benchmark interest rate hikes to combat inflation and bring it down to the 2% target.
Investor Confidence Amid Global Economic Uncertainty
During August 2023, European ETFs saw net inflows of $8.95 billion, which took the year-to-date (YTD) net inflows to $96.05 billion, according to independent ETF research and consultancy firm EFTGI. The net inflows into European ETFs in 2023 are currently at the second-highest level, following the peak of $138.94 billion observed in 2021. Specifically, there were net inflows of $5.25 billion in European equity ETFs and $2.97 billion net inflows into European fixed-income ETFs during August 2023. In contrast, European commodities ETFs experienced a net outflow. Interestingly, this was the eleventh consecutive month that European ETFs observed a net inflow, reflecting the current strength and resilience of the European ETF market. It also reflects investors' positive outlook toward the best European stocks, such as BioNTech SE (NASDAQ:BNTX), Shell plc (NYSE:SHEL), and Stellantis N.V. (NYSE:STLA), despite prevailing global macroeconomic uncertainties.
Overall, the total asset under management (AUM) of European ETFs stands at an all-time high of $1.57 trillion as of August 2023. ETFGI claims that there are over 2,000 products listed on 29 exchanges in 24 countries, reflecting the extensiveness of European ETFs globally. According to ETF.com, 71 European ETFs are traded on the US equity markets. These ETFs primarily focus on equity and currency as their main asset classes. The biggest European ETF traded in the US equity market is the Vanguard FTSE Europe ETF (NYSEARCA:VGK), with an AUM of $24.41 billion and an average daily trading volume of over 2.69 million shares. The ETF, launched in May 2000, has a management fee of 0.11% and is up 18% over the last year.
Another ETF that provides widespread coverage of the European market is the iShares Core MSCI Europe ETF (NYSEARCA:IEUR). The ETF, launched in June 2014, tracks the MSCI Europe Investable Market Index, which captures small, medium, and large-cap stocks across 15 developed markets in Europe. The United Kingdom, France, and Switzerland are the top three country allocations, with a cumulative weight of 56.07% of total assets. The ETF has the highest exposure of 17.15% to the financial sector, which can be used as a benchmark to consider it the best European bank ETF as well.
12 Best European ETFs to Buy
Photo by Chris Liverani on Unsplash
Our Methodology
We have shortlisted the 12 best European ETFs for2023 based on their 5-year performance. Some of the ETFs shared in the list below are considered amongst the best European index funds for retail and institutional investors. The ETFs have been listed in ascending order of their 5-year performance as of September 21.
Best European ETFs to Buy
12. WisdomTree Germany Hedged Equity Fund (NASDAQ:DXGE)
5-Year Price Performance: 17.5%
Total Net Assets as of September 21, 2023: $19.75 million
Expense Ratio: 0.48%
Number of Holdings: 58
WisdomTree Germany Hedged Equity Fund (NASDAQ:DXGE) invests in German equities while hedging exposure to fluctuations between the Euro and US dollar. The ETF follows the WisdomTree Germany Hedged Equity Index, covering over 80% of the German equity market. The top 10 holdings of WisdomTree Germany Hedged Equity Fund (NASDAQ:DXGE) represent 58.81% of total assets and comprise leading corporations like Mercedes-Benz Group AG (MBG.DE), Allianz SE (ALV.DE) and Deutsche Telekom AG (DTE.DE).
11. iShares MSCI Ireland ETF (NYSEARCA:EIRL)
5-Year Price Performance: 20.2%
Total Net Assets as of September 21, 2023: $98.61 million
Expense Ratio: 0.50%
Number of Holdings: 25
iShares MSCI Ireland ETF (NYSEARCA:EIRL) provides exposure to Ireland's economy and equities, which is heavily weighted towards export-oriented multinational companies across sectors like industrials, healthcare, and consumer discretionary. The fund has delivered solid long-term returns. Flutter Entertainment plc (FLTR.IR), CRH plc (NYSE:CRH), Smurfit Kappa Group Plc (SK3.IR), and Kingspan Group plc (KRX.IR) are the top four constituents of iShares MSCI Ireland ETF (NYSEARCA:EIRL) and occupy 54.39% of total assets.
10. WisdomTree Europe Hedged Equity Fund (NYSEARCA:HEDJ)
5-Year Price Performance: 24.7%
Total Net Assets as of September 21, 2023: $1.41 billion
Expense Ratio: 0.58%
Number of Holdings: 125
WisdomTree Europe Hedged Equity Fund (NYSEARCA:HEDJ) invests in European equities while hedging exposure to fluctuations between the Euro and the US dollar. The ETF mimics the WisdomTree Europe Hedged Equity Index, covering around 500 large and mid-cap companies in the major European equity markets. Stellantis N.V. (NYSE:STLA), Banco Bilbao Vizcaya Argentaria, S.A. (NYSE:BBVA), and ASML Holding N.V. (NASDAQ:ASML) are the top three holdings of WisdomTree Europe Hedged Equity Fund (NYSEARCA:HEDJ) with a combined weight of 15.75% of total assets.
9. Xtrackers MSCI Europe Hedged Equity ETF (NYSEARCA:DBEU)
5-Year Price Performance: 25.7%
Total Net Assets as of September 21, 2023: $461.82 million
Expense Ratio: 0.45%
Number of Holdings: 439
Xtrackers MSCI Europe Hedged Equity ETF (NYSEARCA:DBEU) tries to replicate the performance of the MSCI Europe US Dollar Hedged Index, which covers over 400 large and mid-cap companies across 15 developed markets in Europe. The top three allocated sectors in the ETF are financial services, healthcare, and industrials, with a cumulative weight of 48.36%. Xtrackers MSCI Europe Hedged Equity ETF (NYSEARCA:DBEU) makes dividend payments semi-annually and offers an attractive yield of 4.22%. Xtrackers MSCI Europe Hedged Equity ETF (NYSEARCA:DBEU) has the joint second-lowest expense ratio amongst all the ETFs on our list of the best European ETFs.
8. iShares MSCI Netherlands ETF (NYSEARCA:EWN)
5-Year Price Performance: 26.6%
Total Net Assets as of September 21, 2023: $249.12 million
Expense Ratio: 0.50%
Number of Holdings: 56
iShares MSCI Netherlands ETF (NYSEARCA:EWN) offers targeted exposure to Dutch equities and the Netherlands' advanced economy. The fund is tilted towards sectors like IT, consumer staples, and financials. It has delivered strong risk-adjusted returns in the long run. The ETF tracks the MSCI Netherlands Investable Market Index, designed to measure the performance of the Dutch equity market. ASML Holding N.V. (NASDAQ:ASML), ING Groep N.V. (0RIC.IL), Prosus N.V. (PRX.AS), and Wolters Kluwer N.V. (WKL.AS) are the top four holdings of the ETF with a combined weightage of 42.23%.
“ASML Holding N.V. (NASDAQ:ASML) makes semiconductor chip manufacturing equipment and is a leading supplier of lithography systems to the semiconductor industry. We expect ASML to grow above expectations as its innovative EUV technology is deployed and industry capacity expands. This in turn should lead to margin expansion and earnings leverage. In addition to more visible growth and profitability drivers relative to Intel, ASML also has a stronger balance sheet and higher returns on capital. As a semiconductor capital equipment provider, ASML directly improves the energy efficiency of semiconductor manufacturing, and governance and diversity initiatives at ASML are best in class.”
7. Franklin FTSE France ETF (NYSEARCA:FLFR)
5-Year Price Performance: 26.7%
Total Net Assets as of September 21, 2023: $6.15 million
Expense Ratio: 0.09%
Number of Holdings: 70
Franklin FTSE France ETF (NYSEARCA:FLFR) tracks the FTSE France RIC Capped Index, designed to represent the performance of large and mid-cap French companies. Overall, the ETF has the lowest cost amongst all the ETFs on our list of the best European ETFs. Franklin FTSE France ETF (NYSEARCA:FLFR) provides exposure to French large and mid-cap equities and tilts towards export-oriented consumer discretionary and industrial companies. LVMH Moët Hennessy - Louis Vuitton, Société Européenne (MC.PA), TotalEnergies SE (NYSE:TTE), and Sanofi (SNW.F) are the top three constituents of the fund with a combined weightage of 25%.
Total Net Assets as of September 21, 2023: $37.86 million
Expense Ratio: 0.45%
Number of Holdings: 654
Xtrackers MSCI Eurozone Hedged Equity ETF (NYSEARCA:DBEZ) provides exposure to leading Eurozone companies. The ETF is developed to track the investment results of the MSCI EMU US Dollar Hedged Index. Xtrackers MSCI Eurozone Hedged Equity ETF (NYSEARCA:DBEZ) holds over 200 large and mid-cap stocks across the Eurozone, with equity securities from France, Germany, Netherlands, Spain, and Italy making up the top country allocations.
In addition to the ETFs, the best European stocks, such as BioNTech SE (NASDAQ:BNTX), Shell plc (NYSE:SHEL), and Stellantis N.V. (NYSE:STLA), are also attracting investor attention.
