The acronym FTSE stands for Financial Times and Stock Exchange, and the group specializes in developing indexes for financial products. FTSE Russell (informally called the "footsie") is owned by the London Stock Exchange Group (LSEG).
Learn more about the FTSE, its indexes, and how they work.
What Is the FTSE?
FTSE Russell develops indexes used as benchmarks for investment funds, ETFs, and other financial products. The most popular index maintained by FTSE Russell is the FTSE 100, which consists of the 100 most highly capitalized companies in the U.K. 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 reached highs of over 7,000. Many international investors look to the FTSE indexes, and the FTSE 100 in particular, as a proxy for the wider U.K. market, similar to how U.S. investors look at the Dow Jones or S&P 500 indexes.
How the FTSE Works
Indexes track the performance of a group of securities. FTSE Rusell creates indexes and performs research and analysis for financial firms. FTSE Russell's most popular indexes include the FTSE 100, FTSE 250, FTSE 350, and the FTSE All-Share. FTSE Russell also offers ethical indexes, collectively known as FTSE4Good, which track global, Europe, U.K., U.S., and other markets.
Some commonly recognizable companies trading on the FTSE 100 include:
- Rolls-Royce Holdings
What It Means for Individual Investors
There are many ways for international investors to gain exposure to the FTSE 100 and FTSE Russell's other indexes. 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.
Some common FTSE Group ETFs that trade on foreign exchanges include:
- iShares FTSE 100
- HSBC FTSE 100 ETF
- Lyxor FTSE 100 ETF
- UBS FTSE 100 ETF
Investors should always be cognizant of expense ratios when investing in international ETFs since they can eat into returns over the long run. It's also a good idea to look at the fund's underlying portfolio for industry or sector concentration risks. For instance, the U.K. has a high concentration of financial services companies compared to many other countries.
American depository receipts (ADRs) are also available for some individual components of these indices. ADRs are securities that represent indirect ownership in shares in companies that aren't traded on U.S. exchanges. Popular ADRs include:
- Vodafone Group (NASDAQ: VOD)
- Barclays plc (NYSE: BCS)
- Unilever plc (NYSE: UL)
- HSBC Holdings (NYSE: HSBC)
Investors should keep in mind that ADRs may not have as much liquidity as the LSE-traded version of the stock.
Remember that these companies may not report to the U.S. Securities and Exchange Commission (SEC), making it more difficult to conduct due diligence.
Alternatives to the FTSE
International investors seeking exposure to the United Kingdom have other options, too. Aside from FTSE Russell's indexes, several other ETFs offer broad exposure to the region. The indexes behind these ETFs include MSCI, STOXX, and HOLDRS, among others, and each offers a unique take on portfolio allocation.
Some common ETFs focused on the U.K. include:
- MSCI United Kingdom Index Fund (NYSE: EWU)
- STOXX European Select Dividend Index Fund (NYSE: FDD)
- SPDR DJ STOXX 50 ETF (NYSE: FEU)
- BLDRS Developed Markets 100 ADR Index (NYSE: ADRD)
Investors should keep in mind that some of these ETFs have broader exposure than just the U.K. For example, they may have meaningful exposure to European stocks, which could introduce certain risks.
- FTSE Russell develops indexes used as benchmarks for investment funds.
- The most popular FTSE Russell index is the FTSE 100, which includes the 100 most highly capitalized companies in the UK.
- ETFs are a popular way to take advantage of the FTSE 100 and other FTSE indexes.
- You can also invest in U.K.-focused ETFs that trade on U.S. stock exchanges.