How do I invest in European Small Cap stocks?

It is well known that companies with smaller market capitalizations generate higher returns over the long term. However, they also come with higher risks that investors should efficiently manage. Diversification of investments with ETFs is the safest bet for an independent investor to approach the small cap stocks.

There are essentially four indices available to invest with ETFs in European small cap companies. This Investment Guide for European small cap stocks will help you navigate between the peculiarities of the EURO STOXX® Small, MSCI EMU Small Cap, MSCI Europe Small Cap, STOXX® Europe Small 200 and the ETFs tracking them. It will allow you to find the most suitable European small cap ETFs for you by ranking them according to your preferences.

The best European Small Cap ETF by 1-year fund return as of 31/10/2024

All European small cap ETFs ranked by fund return

The largest European Small Cap ETF by fund size in GBP

All European small cap ETFs ranked by fund size

The cheapest European Small Cap ETF by total expense ratio

All European small cap ETFs ranked by total expense ratio

Methodologies of the most important indices

Source: justETF Research; As of 31/01/2020

EURO STOXX® Small index

The EURO STOXX® Small index comprises small sized companies from the underlying EURO STOXX® index. The EURO STOXX® index is a subset of the STOXX® Europe 600 index comprising only companies from countries in the Eurozone. Small caps are determined as the bottom 33 percent companies in the underlying index ranked by their market capitalization. The stocks passing the selection screen are weighted by their free float market capitalization.

Methodology of the EURO STOXX® Small Factsheet Methodology

• 88 (as of 30/06/2021) small cap stocks from the Eurozone
• Index rebalancing takes place quarterly
• Stock selection is based on the size of companies
• Selection criteria: the bottom third of the EURO STOXX® index is selected
• Index weighted by free float market capitalization

MSCI EMU Small Cap index

The MSCI EMU Small Cap index captures small cap stocks across 10 developed countries in the Eurozone. The index represents the smallest firms (appr. 14 percent of the free float-adjusted market cap) of the MSCI EMU Investable Market Index. The stocks passing the selection screen are weighted by their free float market capitalization.

Methodology of the MSCI EMU Small Cap Factsheet Methodology

• 388 (as of 30/09/2024) small cap stocks from developed Eurozone countries
• Index rebalancing takes place quarterly
• Index has minimum size, free float, liquidity and length of trading criteria
• Stock selection is based on free float market cap
• Selection criteria: smallest companies of the MSCI EMU Investable Market Index
• Index weighted by free float market capitalization

MSCI Europe Small Cap index

The MSCI Europe Small Cap index includes small cap stocks from 15 developed countries in Europe. The index represents the smallest firms (appr. 14 percent of the free float-adjusted market cap) of the MSCI Europe Investable Market Index. The stocks passing the selection screen are weighted by their free float market capitalization.

Methodology of the MSCI Europe Small Cap Factsheet Methodology

• 870 (as of 30/09/2024) small cap stocks from developed European countries
• Index rebalancing takes place quarterly
• Index has minimum size, free float, liquidity and length of trading criteria
• Stock selection is based on free float market cap
• Selection criteria: smallest companies of the MSCI Europe Investable Market Index
• Index weighted by free float market capitalization

STOXX® Europe Small 200 index

The STOXX® Europe Small 200 index tracks the 200 smallest companies (as measured by free float market cap) from the underlying STOXX® Europe 600 index, which consists of 600 European companies. The stocks passing the selection screen are weighted by their free float market capitalization.

Methodology of the STOXX® Europe Small 200 Factsheet Methodology

• 200 small cap stocks from European countries
• Index rebalancing takes place quarterly
• Stock selection is based on their free float market cap
• Selection criteria: The 200 smallest stocks (ranked from 401 to 600) from the STOXX® Europe 600 index are selected
• Index weighted by free float market capitalization

When choosing a European small cap ETF one should consider several other factors in addition to the methodology of the underlying index and performance of an ETF. For better comparison, you will find a list of all European small cap ETFs with details on size, cost, age, income, domicile and replication method ranked by fund size.

Compare all European small cap ETFs in detail
Compare all European small cap ETFs in a chart

Source: justETF.com; As of 16/11/2024

Return comparison of all Small Cap ETFs on European equities

The table shows the returns of all European small cap ETFs in comparison. All return figures are including dividends as of month end. Besides the return the reference date on which you conduct the comparison is important. In order to find the best ETFs, you can also perform a chart comparison.

• Cumulative
• Calendar year

Source: justETF.com; As of 31/10/2024; Calculations in GBP including dividends