Best Europe ETFs for Irish Investors
Europe ETFs allow you to invest in a wide range of companies based in developed European countries. Our top pick for the best overall Europe ETF is the Amundi Prime Europe UCITS ETF DR (C), a physical, accumulating ETF domiciled in Luxembourg with a TER of 0.05%. Its ISIN is LU2089238039.
Reading time: 9 min
Written by:
Dan Malone
Our Top Picks | Best For | |
|---|---|---|
Best Overall
EU Regulated Provider
UCITS Compliant
Why we picked this ETF
The Amundi Prime Europe UCITS ETF DR (C) (Acc) offers the lowest TER of any Developed Europe ETF available to Irish investors at 0.05%. It’s a Luxembourg-domiciled fund with an accumulating, unhedged share class that uses a full replication strategy. It has a positive annualised tracking difference since inception.
Best for Dividends
EU Regulated Provider
UCITS Compliant
Why we picked this ETF
The Amundi Prime Europe UCITS ETF DR (D) (Dist) offers the lowest TER of any Developed Europe ETF available to Irish investors at 0.05%. It’s a Luxembourg-domiciled fund with a distributing, unhedged share class that uses a full replication strategy. It has a positive annualised tracking difference since inception.
Best Synthetic
EU Regulated Provider
UCITS Compliant
Why we picked this ETF
The Invesco STOXX Europe 600 UCITS ETF (Acc) has the second lowest TER of synthetic Developed Europe ETFs offering exposure to the STOXX Europe 600 index at 0.19%. It’s an Irish-domiciled fund with an accumulating, unhedged share class that uses a total return swap strategy. It has a positive annualised tracking difference since inception. The alternative option is the French-domiciled BNP Paribas Easy STOXX Europe 600 UCITS ETF (Acc) which has a TER of 0.18%. We chose Invesco because they’re one of the most transparent providers of synthetic ETFs.
Best Euro-Hedged
EU Regulated Provider
UCITS Compliant
Why we picked this ETF
The UBS Core MSCI Europe UCITS ETF hEUR (Acc) offers the lowest TER of any euro-hedged Developed Europe ETF available to Irish investors at 0.09%. It's a Luxembourg-domiciled fund with an accumulating, euro-hedged share class that uses a full replication strategy. It has a positive annualised tracking difference since inception.
Best for Coverage
EU Regulated Provider
UCITS Compliant
Why we picked this ETF
The Amundi Core STOXX Europe 600 UCITS ETF (Acc) provides exposure to the STOXX Europe 600 index – one of the most comprehensive benchmarks for Developed Europe stocks, with 90% universe coverage. The fund has the joint-lowest TER for STOXX Europe 600 ETFs available to Irish investors at 0.07%. It’s a Luxembourg-domiciled fund with an accumulating, unhedged share class that uses a full replication strategy. It has a positive annualised tracking difference since inception.
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Europe Indexes
The developed European market is represented by four main indexes:
FTSE Developed Europe Index
The FTSE Developed Europe Index is made up of over 490 companies spanning 20 European markets.
MSCI Europe Index
The MSCI Europe Index is made up of over 400 companies across 15 European markets. It covers 85% of the total value of the developed European equity market.
STOXX Europe 600 Index
The STOXX Europe 600 Index comprises 600 companies in 17 countries and 11 industries. It covers nearly 90% of the investable European market.
Solactive GBS Developed Markets Europe Large & Mid Cap Index
The Solactive GBS Developed Markets Europe Large & Mid Cap Index consists of over 380 companies across 15 countries. It covers the largest 85% worth of market capitalisation in the developed European market.
Key Insight:
The FTSE Developed Europe All-Cap Index and the MSCI Europe All-Cap Index are another two well-known European indices. The former includes over 1,100 companies while the latter has over 2,600.
However, there are no readily available UCITS-compliant ETFs that provide Irish investors with their respective returns. For that reason, they’ve been omitted from this list.
European Indexes Compared
Not all European indices measure the same thing, though the differences between them aren’t as significant as All-World or Emerging Markets indices.
Index
Market Cap
Companies
Size
Markets
Countries
Coverage
Key Insight:
The indices listed above are market capitalisation weighted indices. That means the most valuable companies in the index will have the greatest impact on its performance. They’ll nearly always have an identical top 10 index constituents.
For indices, market capitalisation is calculated by multiplying the share price of the company by the number of floating shares. Floating shares are the shares that are available for public trading. This excludes any ‘locked-up’ or closely held shares from the calculation.
The companies that are included within an index will depend on the index methodology. For example, an index may only measure ‘large and mid cap’ companies. ‘Cap’ is short for market capitalisation, which is the total value of the company as determined by the stock market.
The index may state that any companies that make up the top 70% of the total market’s value are ‘large cap companies’, while the next 15% are ‘mid cap companies’. If the index were a ‘large and mid cap index’, the companies making up the bottom 15% (i.e. ‘small cap companies’) would be ignored.
An index like the STOXX Europe 600 Index includes small cap companies, making it more representative of the European stock market as a whole. Other factors, like whether or not an index provider lists a country as ‘developed’ or ‘emerging’, will impact the companies included within the index.
Did You Know? European countries like the Czech Republic, Greece, Hungary, Poland and Turkey can be classified as emerging markets by index providers. In those circumstances, companies in these European countries would feature in an Emerging Markets ETF, not a Developed Europe ETF.
Europe ETF Domicile: Luxembourg vs. Ireland
Some of the most competitive Europe ETFs are domiciled in Luxembourg and not Ireland. This is indicated by the presence of ‘LU’ at the start of the ETF’s ISIN. We tend to prefer Irish domiciled ETFs when we’re getting exposure to U.S. equities, like with an S&P 500 ETF. That’s because of Ireland’s unique tax treaty with the United States which gives Irish domiciled S&P 500 ETFs a tax advantage over their European counterparts. You can read more about that tax advantage in our Best North American ETFs guide.
But for Europe ETFs, we’re talking about investing in European companies. The tax treaties that are held by both Ireland and Luxembourg with European countries, where these companies are located, are largely the same. Meaning, there is no comparable tax advantage of Irish domiciled Europe ETFs as compared to Luxembourg domiciled Europe ETFs.
Synthetic Europe ETFs
Synthetic Europe ETFs benefit from tax advantages over their physical counterparts. This is because synthetic Europe ETFs avoid stamp duty when purchasing UK stocks as well as a financial transaction tax (FTT) on French, Italian and Spanish stocks. Companies in these regions often account for a significant percentage of a European index’s value:
- UK Companies: >22% of the index
- French Companies: >15% of the index
- Italian Companies: >5% of the index
- Spanish Companies: >5% of the index
The savings associated with not having to pay stamp duty or a financial transaction tax when gaining exposure to stocks in these countries will have a positive impact on investor returns. Because indexes don’t account for trading costs like bid-ask spreads, synthetic Europe ETF investors are also more likely to earn a return that’s closer to the index. This would be referred to as a low tracking error.
However, if the synthetic ETF comes with a higher total expense ratio (TER) and negative swap spreads, the investor’s net return may still deviate from the index, despite having a lower tracking error. This is called a tracking difference.
Europe ETFs & Currency Risk
Not all European countries use the euro. In fact, companies based in the United Kingdom and Switzerland make up over 22% and 14% of the value of most major European indexes. These stocks would be quoted in GBP/GBX and CHF respectively.
That means Irish investors buying shares in Europe ETFs will be exposed to currency risk, just as they would be with North American, Emerging Markets and All-World ETFs. To learn more about the effects of foreign currency translation on investment returns, check out our foreign exchange calculator.
The main way to mitigate this risk is by purchasing a Euro-hedged share class of a Europe ETF. There are a handful of these available and can be found using our ETF comparison tool.
Key Insight:
There are two other solutions to managing currency risk with Europe ETFs:
- 1Invest in an ETF that tracks a Eurozone-only index like the MSCI European Economic and Monetary Union (EMU) Index or the EURO STOXX 50 Index. These indexes will exclude European companies in non-Euro countries.
- 2Purchase ETFs that track a ‘Europe ex-UK’ index. These are subset indexes that measure the performance of European equities, with the exception of UK companies. While this wouldn’t fully eliminate currency risk, it would significantly reduce the exposure to non-Euro assets.
The downsides of both options include less exposure to European companies and potentially higher TERs.
Frequently Asked Questions
Not as much as it does for North American and All-World ETFs. Ireland and Luxembourg have very similar tax treaties with other European nations, eliminating any major tax advantages of one ETF domicile over another. That said, Europe ETFs domiciled in countries such as France or Germany tend to have higher total expense ratios (TERs).
Different index providers have different standards for determining which countries are and aren’t ‘developed’. For example, both FTSE and Solactive list Poland as a developed market, while MSCI and STOXX classify it as an emerging market. Poland is just one example. That’s why the number of countries included within an index category can vary between providers.
Synthetic Europe ETFs save money on taxes by not having to physically buy shares on local exchanges. A physical Europe ETF will directly invest in UK, French, Italian and Spanish companies. In each case, the ETF will pay local taxes. This hurts returns. Synthetic ETFs avoid this by replicating the index return through financial contracts known as total return swaps.
Yes, the share class currency of the ETF will determine the currency that you receive dividends in. While most Europe ETFs will have a euro share class currency, there are some listed in USD. USD share classes pay out USD dividends. This may trigger a currency conversion fee on your investing platform.
There are two factsheets that you need to look at: the ETF factsheet and the index factsheet. The ETF factsheet will be different for every ETF. The index factsheet will be the same for ETFs that are tracking the same index. Both are presented by Honest.
Compare ETFs Side by Side
Ready to choose an ETF? Compare the most popular ETFs available to Irish investors by index, fees, dividends, and more to find the right investment for your portfolio.
