FTSE - What is the FTSE and Why it Matters
It's Not Just a Flirtatious Gesture, It's a Stock Index!
The FTSE Group (informally called the "footsie") is a joint venture between the Financial Times of London and the London Stock Exchange. The acronym FTSE stands for Financial Times and Stock Exchange and the group's indices comprise the most highly capitalized companies in the United Kingdom listed on the London Stock Exchange.
The FTSE 100 was first created in January of 1984 with a base level of 1,000 and has since jumped to a level of around 5,500, as of November 2011.
While this is lower than its peek of 6,950 in December of 1999, during the height of the Internet bubble, the index has rebounded from its lows reached during the European sovereign debt crisis of late 2010 and early 2011.
In this article, we will take a look at the popular stock market index, how investors can take a position in it, and some alternatives indexes for investors to consider with similar exposure.
FTSE Indices: From 100 to 350 and Beyond
The most popular index maintained by the FTSE Group is the FTSE 100, which consists of the 100 most highly capitalized companies in the UK listed on the LSE. But the FTSE Group also maintains other indices ranging from the FTSE All-Share to so-called ethical indices like the FTSE4Good Global index that focuses on corporate responsibility.
FTSE Group's most common indices include the FTSE 100, FTSE 250, FTSE 350 and the FTSE All-Share. But these indices can be further broken down into high yield, low yield and ex-IT indices that are computed at the end of the day.
The FTSE Group's ethical indices, collectively known as FTSE4Good, track global, Europe, UK, USA and other markets.
Some commonly recognizable companies trading on the FTSE 100 include:
- BP plc (NYSE: BP)
- BHP Billiton plc (NYSE: BBL)
- Randgold Resources Ltd. (NASDAQ: GOLD)
- Rio Tinto plc (NYSE: RIO)
- GlaxoSmithKline plc (NYSE: GSK)
A complete and updated list of indices and their prices can be found on the FTSE Group's website.
How to Invest in the FTSE 100 & Other Indices
There are many different ways for international investors to gain exposure to the FTSE 100 and FTSE Group's other indices. Exchange-traded funds (ETFs) offer an easy way for investors to gain exposure, but none of the FTSE 100 ETFs trade on U.S. exchanges. But American Depository Receipts (ADRs) are available for some individual components of these indices.
Some common FTSE Group ETFs include:
- iShares FTSE 100 (LSE: ISF)
- HSBC FTSE 100 ETF (EPA: UKX)
- DBX FTSE 100 (LSE: XUKX)
- Lyxor FTSE 100 ETF
- UBS FTSE 100 ETF
In addition to the five ADRs listed above, other popular ADRs include:
- Vodafone Group (NASDAQ: VOD)
- Barclays plc (NYSE: BCS)
- Unilever plc (NYSE: UL)
- HSBC Holdings (NYSE: HBC)
- ARM Holdings (NASDAQ: ARMH)
Some Alternatives to the FTSE Group's Indices
International investors seeking exposure to the United Kingdom have other options, too. Aside from the FTSE Group's indices, there are several other ETFs that offer broad exposure to the region. The indices behind these ETFs include MSCI, BLDRS, STOXX and HOLDRS among others and each offers a unique take on portfolio allocation.
Some common ETFs focused on the UK include:
- MSCI United Kingdom Index Fund (NYSE: EWU)
- BLDRS Europe 100 ADR Index Fund (NYSE: ADRU)
- STOXX European Select Dividend Index Fund (NYSE: FDD)
- SPDR DJ STOXX 50 ETF (NYSE: FEU)
- BLDRS Developed Markets 100 ADR Index (NYSE: ADRD)
Key Points to Remember
- The FTSE Group is the largest provides of indices in the UK with the FTSE 100 being its most popular index.
- International investors can gain exposure to the FTSE 100 companies through ETFs trading largely on foreign exchanges or through ADRs for individual components of the index trading on U.S. stock exchanges.
- Alternatively, international investors can also purchase non-FTSE ETFs with high exposure to the UK to gain similar exposure.