How many Poland ETFs does it take to satisfy investors? At least two. The latest addition to the iShares line of ETF products began trading on Wednesday as the company launched the MSCI Poland Investable Market Index Fund (EPOL). The new ETF, which tracks the MSCI Poland Investable Market Index, is the second to offer exposure to the Polish economy and the fourth single-country iShares product introduced in the last month (see The Case For The Ireland ETF).
Until late last year, there was no ETF option for U.S. investors looking to establish exposure to Poland, the world’s 20th largest economy. In November Van Eck launched the Market Vectors Poland ETF (PLND), a fund with which EPOL will likely compete. There are a number of similarities between EPOL and PLND. Both count PKO Bank Polski SA as the largest individual holding and both make significant allocations to banks; the financial sector accounts for about 45% of the index underlying EPOL and 39% of PLND (see Five Country ETFs Dominated By Financials). But there are some significant differences as well. EPOL will maintain about 30 holdings, compared to 25 for PLND. EPOL charges an expense ratio of 0.65%, slightly lower than the 0.76% charged by PLND.
A Case For Poland
Poland is one of the world’s most unique economies, an emerging European market that has benefited in recent years from a surge in domestic spending and limited exposure to exports. Since economic liberalization in 1990, Poland has implemented generally sound economic policies that have spurred significant growth and attracted waves of foreign investment (see The Investment Case For Poland prepared by Van Eck in connection with the PLND launch last year).
The country’s plan to adopt the euro has been derailed several times, an apparent blessing in disguise in hindsight. PLND has outperformed ETFs focusing on developed European economies in 2010, thanks in part to avoidance of the “euro drag” that has weighed on returns (see all ETFs in the Europe Equities ETFdb Category).
The Polish economy was recently in the international spotlight under tragic circumstances; a plane crash in Russia killed the Polish president and a host of high-ranking government officials, leaving the nation without many of its political, military, and economic leaders (see Poland ETF In Focus After President’s Death).
iShares now maintains several products that compete directly with ETFs from Van Eck; earlier this month the San Francisco-based firm launched the MSCI Indonesia Investable Market Index Fund (EIDO), a product that will compete with the existing Market Vectors Indonesia ETF (IDX).
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Disclosure: No positions at time of writing.