But although cryptic names can seem off-putting, they are usually based on a simple logic that can help you understand whether an ETF is right for you. Once you know how to read ETF names you’ll be able to target your searches more quickly, plus it’s a lot easier than cracking The Times crossword puzzle!
ETF names consist of five componentsAn ETF name is built from keywords that reveal the product’s most important features. The basic structure usually looks like this:
The keywords may occur in a different order, or individual components may be missed out, but the principle remains the same.
Let’s take a look at some real-life examples of ETF names that help explain what the keywords tell you.
1. Provider: Who issued the ETF?The ETF provider’s brand name usually comes first. For example, iShares Core FTSE 100 UCITS ETF (Dist). ETF providers are commonly subsidiaries of large banks or asset managers. iShares is part of BlackRock, which is the world’s largest asset manager, while db X-trackers is the ETF brand of Deutsche Bank.
The provider’s name may also be tagged with a sub-brand, like Core in the example above. This shows that the ETF is part of a sub-group in the provider’s product range.
Terms like Core are worth looking out for because these products are usually very cost-effective and generally based around key portfolio building blocks like the FTSE 100 or MSCI World index.
2. Index: Where do you invest?The second component is the index that the ETF tracks. For example: iShares Core FTSE 100 UCITS ETF (Dist).
Well-known index vendors include MSCI, FTSE and S&P. They provide independent verification of the indexes and licence them to the ETF providers.
Often the index name reflects the region as well as the number of stocks tracked. For instance the EURO STOXX 50 tracks the 50 largest companies traded within the Eurozone.
You may also see an index with a suffix such as NR, TR or TRN. NR stands for Net Return, TR is Total Return and TRN is Total Return Net.
The suffixes simply tell you whether the index performance is calculated before or after withholding taxes on dividends. However, this has no direct impact on the performance of the ETF itself which will distribute any dividends you are entitled to.
3. Regulatory information: Important for consumer protectionAlways look for the words UCITS in your ETF name, as in: iShares Core FTSE 100 UCITS ETF (Dist). This means the ETF is subject to European regulations specifically designed to protect private investors.
UCITS ETFs must meet certain standards such as not holding more than 20% of fund assets in any single security - which helps diversify the product.
The term ETF is also a regulatory classification. It clearly distinguishes ETFs from other exchange-traded products such as ETCs (Exchange Traded Commodities) or ETNs (Exchange Traded Notes).
ETCs and ETNs are not UCITS compliant and are subject to additional risks that do not apply to ETFs. Make sure you research these products carefully before you decide to invest in them.
4. Share class: characteristics of the ETFTowards the end of the ETF name you will usually find cryptic abbreviations which provide information on the share class, such as: db x-trackers S&P 500 UCITS ETF 1C.
ETFs often issue several share classes. Share classes are variants of the fund that may differ by fees, trading currency or income distribution method.
You can identify the precise variant you want by its unique 12-figure ISIN number. That enables you to be sure you’re investing in the Sterling rather than Euro version of an ETF, for example.
Unfortunately, each provider uses a bespoke set of abbreviations so there’s no quick hack for deciphering them.
5. Extra information
IncomeIncome paid as dividends or interest is either sent directly to your brokerage account or automatically reinvested back into the ETF to grow your holdings at a faster pace.
ETFs that pay out are known as "distributing" as in: iShares Core FTSE 100 UCITS ETF (Dist). ETFs that reinvest are termed "capitalising" or "accumulating" as in: iShares FTSE 100 UCITS ETF (Acc).
Distributing ETFs are abbreviated as:
Accumulating ETFs usually contain one of the following abbreviations:
CurrencyETFs that invest in non-UK securities carry foreign currency risk. If the ETF’s name indicates it’s GBP hedged then it is protected against currency fluctuations by the use of forward contracts or options.
In the case of db X-trackers S&P 500 UCITS ETF (DR) 2C (GBP hedged), a UK resident will earn the return of the US index because the hedge cancels out the effect of the pound’s performance against the dollar.
If a currency is noted but without the term "hedged", then this is usually a reference to the ETF’s trading currency.
Products are often offered in different currencies (GBP, EUR, USD) on the London Stock Exchange.
DomicileSome ETF providers like to highlight the fact that their ETF is based in Ireland. Why? Because an Irish domicile can offer a tax advantage for some investors. The "(IE)" abbreviation in UBS ETF names is a good example of this.
Replication typeYou may spot an ETF’s replication method in its name - if a provider wants to emphasise it. This is a particular feature of db X-tracker products where the term DR stands for Direct Replication. In this case, db X-trackers want to stress the fact that they offer physical ETFs, after their years as a renowned synthetic ETF provider.
iShares are reputed for their physical ETFs already, so they don’t mention replication in their product names.
Be careful when you see: Short, 2x, 3xLeveraged ETFs carry a leveraged, double, 2x or 3x in their name. These risky ETFs enable investors to multiply the movements of indices by a factor of two or three.
ETFs that benefit from declining prices are usually marked with the term short.
Be very careful with short and leveraged products. They are high risk and specialised investments that should only be used by very experienced investors who thoroughly understand their workings.
ConclusionETF names are often confusing at first glance but you’ll soon get the hang of them. We’ve outlined the most important things to look out for and you’ll notice that the same sets of terms and abbreviations keep cropping up.
The best tactic is to use the information contained in the name to guide you to a shortlist of suitable ETFs and then dig deeper into their profiles to choose the right ones for you.
On justETF you will find additional features that will help refine your ETF selection:
- Index descriptions on each ETF profile
- Filter and compare ETFs with our ETF search
- Review important information in the ETF’s profile