What is ETF overlap?

ETF overlap is the extent to which two or more funds in a portfolio hold the same companies. It is common and easy to miss: an MSCI World ETF, an S&P 500 ETF and a technology ETF look like three different investments, but the same handful of large US companies sit at the top of all three. The portfolio then holds more of those companies than intended, and is less diversified than its number of funds suggests.

How overlap is measured

The overlap between two funds $A$ and $B$ is the sum, over all the companies they share, of the smaller of the two weights:

\text{Overlap}(A, B) = \sum_{c} \min(w_{A,c}, \, w_{B,c})

where $w_{A,c}$ is the weight of company $c$ in fund $A$ . It ranges from 0% (no common holdings) to 100% (identical funds). An overlap of 60% means that 60% of each fund's value is invested in the same way.

For the portfolio as a whole, what matters is the combined exposure to each company across all funds and direct holdings:

E_c = \sum_{i} \frac{V_i}{V_{\text{total}}} \, w_{i,c}

where $V_i$ is the value of holding $i$ and $w_{i,c}$ the weight of company $c$ within it.

A simple illustration

A portfolio holds €20,000 in an MSCI World ETF, €20,000 in an S&P 500 ETF and €4,000 in the shares of one large technology company. That company makes up 5% of the world ETF and 7% of the S&P 500 ETF:

E = \frac{20{,}000 \times 0.05 + 20{,}000 \times 0.07 + 4{,}000}{44{,}000} = \frac{6{,}400}{44{,}000} \approx 14.5\%

Directly, the company is 9% of the portfolio; through the funds, its real weight is 14.5%. And because the United States makes up around 70% of the MSCI World, the two ETFs overlap by well over half: the portfolio is far more a bet on large US companies than its structure suggests.

Why it matters

Hidden concentration. The largest companies end up with bigger weights than in any single index.
False diversification. A fund that overlaps heavily with an existing one adds costs and complexity, but little new exposure.
Doubled bets. Individual shares of companies that are already top holdings of an ETF add to the same exposure again.

How to reduce it

Combine funds that complement each other, such as a developed-markets ETF with an emerging-markets ETF, or a world ETF with a small-cap ETF, instead of funds covering the same large companies.
Check the combined exposure to the largest companies after adding any fund or stock.
Use one broad fund as the core. A single all-world ETF already contains most of what several regional funds would.

Overlap is not always a mistake: a deliberate tilt toward one region or company can be a reasonable choice. It becomes a problem when it is invisible.

A worked example

Worked through on a sample portfolio. The figures below are that portfolio’s, not yours.

Am I accidentally holding the same companies through multiple ETFs?

I found overlaps between ETFs in your portfolio. The table below lists each ETF pair, how many companies they share, and the combined shared value within the covered portion of your portfolio.

ETF pair	Shared companies (count)	Combined shared value (EUR)
iShares Core MSCI World UCITS ETF & Vanguard FTSE All-World UCITS ETF	13	153,72 €
iShares Core MSCI World UCITS ETF & iShares Core MSCI EM IMI UCITS ETF USD (Acc)	3	57,79 €
iShares Core MSCI EM IMI UCITS ETF USD (Acc) & Vanguard FTSE All-World UCITS ETF	6	46,68 €

This breakdown reflects only 29,51% of your portfolio (look‑through coverage). The rows show the exact count of shared companies and the combined value that appears in both ETFs for the covered assets.

See these numbers for your own portfolio

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