The FTSE 100 is the index of the 100 largest companies listed in London. It is also the most
commonly misread major benchmark in Europe. The misreading is simple: people treat it as a bet on the British economy.
In reality, it mostly is not.
iShares runs the largest European fund following it. It describes the exposure as “the
100 largest UK listed companies” delivering “globally diversified growth through large UK
based sector leading companies”. That phrase — globally diversified — is the key.
Listed in London, earning everywhere
The FTSE 100 selects on listing venue, not on where revenue comes from. Large multinationals dominate the
index — energy, mining, pharmaceuticals, banks, consumer goods. They happen to list in London. However, they
generate the majority of their earnings abroad, much of it in US dollars. For more detail, see our guide: FTSE 250 Index.
Two practical consequences follow.
It is a poor proxy for the UK economy. Domestic British economic conditions affect the FTSE 100 far
less than they affect the FTSE 250. That is because the FTSE 250 contains more genuinely domestic businesses. So anyone
buying the FTSE 100 to express a view on Britain is buying the wrong instrument. For more detail, see our guide: FTSE 100 Dividend Yield.
Sterling weakness can push it up. These companies earn so much revenue in foreign currency. As a
result, a falling pound raises the sterling value of those earnings. So the index can rise precisely when the domestic
economic news is poor. That looks irrational until you notice where the earnings come from.
Reading a tracker’s key facts
Let’s use the largest European tracker as the worked example. iShares published these figures on
18 September 2026, and they will drift.
Benchmark: FTSE 100 Index, ticker UKXNUK. Number of holdings: 100. This is one of
the few indices where the name and the count genuinely match. That is because the fund uses full replication rather than
optimisation. For more detail, see our guide: FTSE AIM All-Share Index.
Product structure: physical, methodology “replicated”. With only 100 large, liquid
companies, holding every constituent in index proportion is entirely practical. In practice, that usually means tighter
tracking than an optimised approach. For more detail, see our guide: FTSE 100 vs S&P 500.
Total expense ratio 0.07%, income distributing with quarterly distributions,
domiciled in Ireland, with a quarterly rebalance. Meanwhile, the securities-lending return was 0.00% as
of 31 March 2026.
Net assets GBP 16.47bn and a fund launch date of 27 April 2000. In short, this is long-established
infrastructure rather than a recent product.
Note the distributing structure. UK-focused funds often distribute rather than accumulate. That raises a tax question
wherever you live, so see
accumulating
versus distributing.
Comparing index funds? Take the decision workbook with you.
The ETF Comparison Workbook: TER, domicile, withholding and overlap checks in one printable spreadsheet.
Currency: the part Europeans usually miss
A euro-based investor buying a FTSE 100 tracker takes on two currency exposures, not one. First,
the fund trades in sterling, so the euro/sterling rate affects your return. Second, the underlying companies earn
largely in dollars and other currencies. So sterling’s own moves against those currencies affect the index level
itself.
The two effects can partially offset or compound, depending on how the currencies move. A hedged share class
addresses the first exposure, but not the second. Also, hedging carries an ongoing cost. This is a good example of why
“which currency does the fund trade in?” is almost never the right question. Instead, the right question is
where the underlying earnings come from.
Where it fits
The FTSE 100 is a value-and-income-tilted, large-cap, globally-earning index. It has historically carried a higher
dividend yield and a lower valuation than growth-heavy US indices. For example, the tracker above showed a
price/earnings ratio of 17.94 as of the dates cited. It also showed a three-year standard deviation of 9.32%. That is
notably lower volatility than broad global equity.
As a complement to a US-heavy global portfolio, that is a coherent role. As a core holding, however, it is 100
companies in one listing venue with a pronounced sector skew. Compare it against
the EURO STOXX 50 for the UK-versus-eurozone
decision. Then compare it against the STOXX Europe 600
for broad European exposure. Also see our European ETF
guide for the fund options. Finally, check duplication against anything global you hold with the
overlap calculator.
FTSE 100 versus FTSE 250: the distinction that actually matters
If the FTSE 100 is not a bet on the UK economy, the obvious question is which index is. The answer is the FTSE 250 —
the next 250 companies by size below the FTSE 100.
Those companies are smaller, and they earn a far greater share of their revenue at home. So UK consumer demand, UK
interest rates and UK policy affect them more. As a result, the two indices can move quite differently on the same
domestic news. In fact, the gap between them often tells you more than either alone. For example, FTSE 100 strength
alongside FTSE 250 weakness usually signals a currency effect rather than economic optimism.
For a European investor, the practical question is which exposure you actually wanted. Perhaps the intention was to
“add some UK” as a diversifier away from US concentration. If so, the FTSE 100’s globally-earning
multinationals may deliver less genuine diversification than expected. That is because those companies’ fortunes
correlate with the same global demand driving your other holdings. But if the intention was a deliberate bet on British
domestic recovery, the FTSE 100 is the wrong instrument entirely.
Frequently asked questions
Is the FTSE 100 a good way to invest in the UK economy?
No. Its constituents are selected by London listing, not by where they earn. Most are multinationals generating the
bulk of their revenue abroad. The FTSE 250 is the more domestically-exposed UK index.
Why does the FTSE 100 sometimes rise when UK economic news is bad?
Because a weaker pound increases the sterling value of foreign earnings, and most FTSE 100 revenue is earned outside
the UK. Currency movement can outweigh domestic conditions.
Does a FTSE 100 tracker hold all 100 companies?
Typically yes. With 100 large, liquid constituents full replication is practical, and the largest European tracker
reported exactly 100 holdings as of 18 September 2026.
Do I take currency risk as a euro investor?
Two kinds. The fund is priced in sterling, so euro/sterling moves matter; and the underlying companies earn largely
in other currencies, so sterling’s moves against those also affect the index. A hedged share class addresses only the
first.
Cited sources: iShares Core FTSE 100 UCITS ETF product page, and London Stock Exchange — FTSE 100. Verify current fund figures before investing. Educational content, not financial advice.
Not personalised financial advice. Verify your situation with a qualified adviser. Operated by Aurum Digital Marketing LTD (UK), Companies House 15203665.
European UCITS/ETF investor with 11+ years building a global dividend and index portfolio, and founder of Financial Expert Class. I write every guide here from first-hand experience investing across EU brokers and tax regimes — not theory. More about me →