SPDR FTSE UK All Share ETF: March 2025 update

• State Street has been running ETFs since 1993

• This ETF provides access to hundreds of small, medium-sized and large UK companies

• Since launch, the ETF has tracked the FTSE All-Share Index closely

How it fits in a portfolio

An ETF is a basket of investments that often includes shares or bonds. They tend to track the performance of an index such as the FTSE All-Share Index and trade on stock exchanges, like shares. This means their price fluctuates throughout the day.

The State Street FTSE UK All-Share ETF invests in a range of UK companies of different sizes and across a variety of sectors. The FTSE All-Share Index is a combination of several FTSE indices, including the FTSE 100, FTSE 250 and FTSE Small Cap. It covers 98% of the UK market and offers exposure to hundreds of companies. The ETF is heavily weighted to larger businesses meaning performance may be similar to the FTSE 100 – the UK’s 100 largest companies.

An ETF is one of the simplest ways to invest and can be a low-cost starting point for an investment portfolio aiming to deliver long-term growth. ETFs that mainly focus on the UK’s larger companies could help diversify a global investment portfolio, or one focused on smaller companies or bonds.

Manager

Each ETF at State Street has a primary and secondary manager, though this changes as part of the broader investment portfolio team who manage all index products as one group. State Street has a global team of over 100 fund managers and researchers who help run the investments. The team has on average 18 years’ experience, with 12 of these years on average being spent at State Street.

State Street also has dedicated teams that work with brokers and banks to analyse the trades that they place for clients. They ensure that clients are receiving the best trading outcome, like keeping costs as low as possible. Lower costs should help the ETFs track their benchmarks as closely as possible.

Process

This ETF aims to track the performance of the UK stock market, as measured by the FTSE All-Share Index. It doesn’t buy every company in the index though and currently invests in 531 companies compared with 552 in the FTSE All-Share Index. This is known as partial replication and can help the ETF track the index without the cost of buying all the holdings.

The ETF excludes some of the smallest companies in the index because they can be more difficult or costly to trade. They also don’t tend to have as much impact on the FTSE All Share’s performance compared with the largest companies that make up a bigger proportion of the index. Excluding them therefore means the ETF can achieve a more cost-effective way of tracking the index.

It does invest in some smaller companies though and, while they have greater potential for growth, they can experience more extreme price movements, which increases risk.

The ETF has tracking error targets, which measure how closely it's tracking its benchmark. These are monitored by the fund managers daily to ensure the ETF is closely following the index.

This ETF can lend some of its investments to others in exchange for a fee in a process known as stock lending. This helps offset some of the costs involved with running the ETF but adds risk.

As this ETF is listed offshore investors are not usually entitled to compensation from the UK Financial Services Compensation Scheme.

Culture

State Street is mainly a passive house and has more than 40 years of indexing experience. It created the first US ETF in 1993 and has continued to grow this business ever since. It is currently the fourth largest asset manager in the world and runs $4.7trn of assets globally as at 31 December 2024. SPDR is the ETF brand of State Street.

Employees at State Street are encouraged to hold shares in the company so that they are engaged with helping the company perform well and grow. This should help align the company’s interests with its long-term investors.

ESG Integration

State Street signed up to the Principles for Responsible Investment in 2012. The company has an Asset Stewardship team tasked with voting at company meetings and engaging with them on a variety of Environmental, Social and Governance (ESG) and non-ESG related topics.

State Street first offered ESG ETFs in Europe in 2019 and has continued to develop its product range since then. Given State Street offers mostly passive products, there’s often less flexibility to integrate ESG metrics. Instead, State Street focuses on long-term engagement to drive positive change. The company produces a comprehensive annual Asset Stewardship report, which describes its voting and engagement processes and activity in detail.

In February 2024, State Street controversially withdrew from the Climate Action 100+ collaborative engagement initiative, having concluded that new requirements introduced by the scheme were not consistent with the firm’s ‘independent approach’ to voting and engagement. However, there are some suggestions that US political pressure was to blame. State Street was also named alongside several other large US passive investment managers for failing to support shareholder resolutions relating to environmental and social issues.

This ETF is a passive fund designed to track the FTSE All-Share Index, so it doesn’t integrate ESG analysis or exclude companies in industries like tobacco or alcohol.

Cost

The ETF has an ongoing annual fund charge of 0.20%. Ensuring an ETF has a low charge is an important part of tracking the underlying index closely.

The annual charge to hold ETFs in the HL ISA or SIPP is 0.45% (capped at £45 p.a. in the ISA and £200 in the SIPP). There are no charges from HL to hold ETFs within the HL Fund and Share Account or HL Junior ISA.

As ETFs trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.

Performance

Since the ETF launched in February 2012, it’s tracked the FTSE All-Share Index well. Over the last 10 years, it’s returned 77.41%* versus 81.65% for the benchmark. As is typical of ETFs, it’s lagged the benchmark over the long term due to the costs of running the ETF such as dealing charges and taxes. However, the tools used by the managers have helped to keep performance tight to the index.

The FTSE All-Share Index currently has significant exposure to sectors such as financials, consumer staples, industrials and healthcare. Therefore, these sectors are likely to have the biggest impact on the ETF’s performance, though the makeup of the index can change over time.

Over the past 12 months to the end of March, the ETF rose by 10.16% compared to the benchmark which rose by 10.46%. Remember, past performance isn’t a guide to future returns.

The financials sector contributed significantly to the ETF’s overall returns as higher interest rates have been a tailwind for banks who profit from the increased cost of borrowing. Whereas the basic materials sector was the main detractor from performance, due to a weak period for commodity markets which has impacted large UK companies in this sector like Rio Tinto and Glencore.

Large UK companies outperformed the medium sized and smaller companies in the index during this time. The FTSE 100 Index reached a new all-time high earlier this year driven by strong company earnings and expectations of potential interest rate cuts.

With inflation closer to the 2% target, the Bank of England (BoE) lowered interest rates in August 2024 after holding rates at a 16 year high for a full year. Although inflation has risen since then, partly because of the tax increases announced by the government as part of their Autumn budget. The BoE has continued to cut interest rates but has taken a gradual approach and rates could therefore stay higher, and for longer, than initially expected.

Given State Street’s size, experience and expertise running ETFs, this ETF should continue to track the FTSE All-Share Index well in the future, though there are no guarantees.