Many investors have domestic stock portfolios and would like to complement them with exposure to international equities. However, a large number of international equity funds still invest a portion of their assets in companies based in the U.S.
For investors who want pure international equity exposure without it being diluted by more American companies, a global ex-U.S. exchange-traded fund (ETF) may be the best option. These funds invest in stocks all over the world while making a point to avoid investing in the U.S. International ETFs can fit most portfolios, even those that focus on earning dividends.
The following is a list of three of the largest global ex-U.S. equity ETFs by assets under management (AUM).
Key Takeaways
- Investors looking to invest beyond the U.S. should consider purely international ETFs, also known as global ex-U.S. ETFs.
- These are global investment funds that specifically exclude American companies.
- The largest global ex.-U.S. stock ETF is the Vanguard Total International Stock ETF (VXUS), which mostly invests in the Asia-Pacific and European regions.
- Two other notable ETFs for investors seeking international exposure are the iShares MSCI ACWI ex-U.S. ETF (ACWX) and the Vanguard FTSE All-World ex-US ETF (VEU).
1. Vanguard Total International Stock ETF (VXUS)
The Vanguard Total International Stock ETF is the largest major global ex-U.S. fund with $49 billion in AUM as of Sep. 30, 2023. The fund seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in developed and emerging markets, excluding the U.S. It is a passively managed fund that uses index sampling and seeks to track the performance of the FTSE Global All Cap ex-U.S. Index.
The portfolio is the most broadly invested ETF in this list, investing in 8,542 different global equities, with a weighted-averagemarket capitalizationof $32.7 billion. As for regional exposure, the portfolio is allocated as follows: Europe (40.30%); Pacific (26.79%); Emerging Markets (25.39%); N. America (7.08%); Middle East (0.43%); and Other (0.02%). The top 10 countries the VXUS is invested in include Japan, the U.K., China, Canada, France, Switzerland, India, Germany, Australia, and Taiwan.
The fund has an expense ratio of 0.07%. The fund’s distribution yield is 3.11%.
2. Vanguard FTSE All-World ex-US ETF (VEU)
A larger, but still large by ETF standards, total market global equity ex-U.S. ETF is the Vanguard FTSE All-World ex-US ETF with $35.5 billion in AUM as of December 2023. The fund offers a convenient way to get broad exposure across developed and emerging non-U.S. equity markets around the world. It is a passively managed fund that uses index sampling and seeks to track the performance of the FTSE All-World ex-U.S. Index.
The fund invests in 3,810 different equities and has a weighted-average market capitalization of $39.6 billion. Its top 10 holdings equal 10.6% of the portfolio. As for regional exposure, the portfolio is allocated as follows: Europe (41.13%); Pacific (27.05%); Emerging Markets (25.11%); N. America (6.24%); Middle East (0.38%); and Other (0.08%). The top 10 countries the VXUS is invested in include Japan, the U.K., China, Canada, France, Switzerland, India, Germany, Australia, and Taiwan.
The top 10 countries the VEU is invested in include Japan, the U.K., China, France, Canada, Switzerland, Germany, India, Australia, and Taiwan. The fund has anexpense ratioof 0.08%. Thedistribution yieldon the fund is 3.13%.
3. iShares MSCI ACWI ex-U.S. ETF (ACWX)
A larger, but still large by ETF standards, total market global equity ex-U.S. ETF is the iShares MSCI ACWI ex-U.S. ETF with $4.3 billion AUM as of Sep. 30, 2023. This fund seeks to provide investors access to the global equity markets, excluding the United States, including developed and emerging market economies. It is primarily suitable for an investor looking for long-term growth. The fund tracks the MSCI ACWI ex USA Index.
The portfolio is invested in 1,898 different holdings. The fund's top-10 holdings comprise 11% of the portfolio. Top countries represented in the ETF are Japan, the U.K., China, France, Canada, Switzerland, Germany, Australia, India, and Taiwan.
The three most heavily investedsectorstotal 46% of the portfolio. They are financials, industrials, and consumer discretionary. The distribution yield for the ACWX is 2.51%.
What Does Ex-U.S. Mean in an Investment?
Ex-U.S., or ex-United States, refers to an investment fund that specifically excludes shares or other securities issued by American companies. Because the U.S. represents so much of the global market capitalization, American investors who already own U.S equities can diversify geographically by buying ex-U.S. funds. If an American investor instead purchased a comprehensive global stocks fund, it would also include more U.S. stocks, effectively negating some of that diversification.
How Much of Global Market Capitalization Do U.S. Stocks Represent?
American stocks make up the largest equity market in the world, representing nearly 42.9% of the $106 trillion global equity market cap (as of Q3 2023).
What Is the Benchmark Ex-U.S. Index?
The Morgan Stanley Capital International All Country World Index Ex-U.S. (MSCI ACWI Ex-U.S.) is often used as the ex-U.S. benchmark. It is a market-capitalization-weighted index designed to provide a broad measure of global equity market performance, but excluding U.S.-based companies. The MSCI ACWI Ex-U.S. includes both developed and emerging markets.
