European Equity

Where the money actually sits

The category holds 28 funds and 195.1B in combined assets, and those assets are not spread evenly. Vanguard FTSE Europe ETF (VGK), run by Vanguard, holds 37.2B on its own, and the three largest, Vanguard FTSE Europe ETF (VGK), Amundi Core STOXX Europe 600 UCITS ETF Acc (MEUD) and iShares Core MSCI Europe UCITS ETF EUR (Acc) (SMEA), account for 36.9 % of the total. At the other end, iShares STOXX Europe 600 Industrial Goods & Services UCITS ETF (DE) (EXH7) manages only 180M. Size is no guarantee of quality, but it decides two very concrete things: the spread between buying and selling price you pay on every order, and the odds that the fund still exists in ten years.

The fee gap, in money

Ongoing charges run from 0.07 % for Amundi Core STOXX Europe 600 UCITS ETF Acc (MEUD) to 0.53 % for iShares MSCI Sweden ETF (EWD), a gap of 0.46 points, against a category average of 0.23 %. On £10,000 held for ten years that gap is roughly 460 in extra charges, before counting the return that money would itself have earned. It is the one variable in the comparison known in advance: past performance does not repeat, fees repeat every year.

Two funds in one category do not hold the same basket

The 28 funds listed track 21 different indices, among them FTSE Developed Europe All Cap, STOXX Europe 600, MSCI Europe and EURO STOXX 50. The largest tracks FTSE Developed Europe All Cap. That spread is why two funds filed under the same theme can differ by several points over a year: they hold different securities, weight them differently and rebalance on different dates. Each fund page names its index, and that is where a serious comparison starts.

Replication and domicile

27 funds hold the constituents of their index directly, 1 use a swap, including Amundi PEA MSCI Europe UCITS ETF Acc (PCEU) from Amundi. Synthetic replication often tracks more closely and reaches markets that are hard to hold directly, at the price of a counterparty risk that is regulated but real. Physical replication is easier to understand and allows securities lending, which earns the fund income and adds its own risk.

9 of the 28 funds are domiciled in IE, the rest in US, LU and DE. Domicile sets the withholding tax the fund itself suffers on the dividends it receives, a cost absent from the stated fee but present in the return, and it also sets your own tax treatment depending on where you live.

Accumulate or take the income

11 funds accumulate dividends, 17 pay them out. The largest accumulating share class is Amundi Core STOXX Europe 600 UCITS ETF Acc (MEUD), the largest distributing one Vanguard FTSE Europe ETF (VGK). The choice is not about yield, both versions of the same index return the same before tax, but about tax and discipline: the accumulating class reinvests with no cost and no decision, the distributing class pays income that is taxable in the year it arrives.

Age and critical size

The oldest fund in the category, iShares MSCI Switzerland ETF (EWL), launched on 1996-03-12, giving 30 years of history, and the newest, Amundi PEA MSCI Europe UCITS ETF Acc (PCEU), on 2019-05-13. A long record shows how the fund behaved in a fall, which no one-year number can. A fund launched two years ago has lived through a single market regime.

None of the 28 funds manages under 100 million, the smallest being iShares STOXX Europe 600 Industrial Goods & Services UCITS ETF (DE) (EXH7). The category is therefore clear of closure risk for want of size, the risk that forces a sale on the issuer's timetable rather than the holder's.