Adam Laird | Fri 28 February 2014

With the UK economy improving, it is unsurprising that many investors are buying ETFs focused on the UK stock market.

Three of 2014’s most popular ETFs invest in UK companies, iShares FTSE 100, FTSE 250 and iShares FTSE UK Dividend Plus index.

The iShares FTSE 100 ETF simply replicates the performance on the FTSE 100 by buying all the companies within the index, in proportion. Despite being the largest companies on the London Stock Exchange, many also derive a significant amount of revenue from overseas. Examples include many companies like GlaxoSmithKline, Royal Dutch Shell and BP who have substantial overseas businesses.

The iShares FTSE 250 covers the next largest 250 companies on the London Stock Exchange. These are medium-sized companies and are a better representation of the health of the UK economy. The index tends to rise and fall more than the FTSE 100, increasing risk, but over the last 1,3 and 5 years the FTSE 250 has rewarded investors by outperforming the FTSE 100. Please note past performance is not an indication of future returns.

iShares MSCI Japan GBP Hedged UCITS ETF

An interesting member of the top 5 traded ETFs so far in 2014 is the iShares MSCI Japan GBP Hedged UCITS ETF. The Japanese Index was one of the best performing markets over the last year however the Japanese Yen has fallen 17% against the pound during this time impacting investors.

The iShares MSCI Japan GBP Hedged UCITS ETF uses derivatives in attempt to limit the impact of currency movement on the performance of the ETF. If the Japanese Yen weakens further, investors will be better off holding the GBP hedged ETF, but be aware, the ETF performance will be hindered if the Japanese Yen strengthens against the pound. Additionally, hedged ETFs tend to have slightly higher charges than unhedged equivalents.

Please note it is important to choose investments based on your own investment objectives and your attitude to risk. More details on the risks can be found in the Key Investor Information Document or Simplified Prospectus for each ETF. These are available on our factsheets.

Top 5 most purchased ETFs on Vantage between 1st January 2014 and 24th January 2014, in alphabetical order are as follows:

iShares FTSE 100 (ISF)

iShares FTSE 250 (MIDD)

iShares FTSE MIB (IMIB)

iShares FTSE UK Dividend Plus (IUKD)

iShares MSCI Japan GBP Hedged UCITS ETF (IJPH)