Top 5 Countries Most Widely Represented By ETFs
As the ETF universe has expanded rapidly over the past few years, so too has the reach of its exposure. Where there was once only a few hundred products for basic investing, there now stands over 1,400 ETFs with more than one trillion in combined assets. There are now ETFs for not only broad-based investing, but also for satellite holdings in a portfolio to round out missing exposure gaps [see also 25 Things Every Financial Advisor Should Know About ETFs]. One of the most popular themes among these products has come from country-focused investing, as there are now options for a wide variety of different countries and plans for many more.
With so many young funds in the space, the breakdown of country exposures can be hard to wrap your head around. While the U.S. is obviously the most represented country as far as ETF exposure is concerned, there are a number of other foreign countries that receive a fair amount of allocations. Though ETFs exist on foreign exchanges all over the world, we list the five most represented foreign nations by U.S.-listed equity ETFs [see more results on our Free Country Exposure Tool]:
Perhaps the most surprising result on the list, Bermuda exposure comes in higher than countries like Germany, Japan, the Netherlands and a number of other popular markets. To be fair, Bermuda is considered a British territory, not its own nation, though it still stands in the mid-Atlantic as its own entity. It is also the only region on this list that does not have a fund dedicated to it, but instead is represented, although minimally, in many other products. All in all, Bermuda is among the top ten country allocations in about 160 ETFs, but no single fund grants more than 18% of its assets to the region; the Guggenheim Shipping ETF (SEA) has the highest Bermuda exposure of any current product.
It should be noted, however, that the inclusion on this list generally reflects the inclusion of securities traded in Bermuda, though not necessarily headquartered there. The Bermuda Stock Exchange is one of the world’s largest fully electronic offshore securities markets, and reported aggregate market capitalization of more than $300 billion at the end of 2010. In addition to secondary listings for international companies, the BSX features trading in a number of derivative warrants and collective investment vehicles; those two asset classes account for almost all of the total listings.
The region is very affluent and is currently using the Bermudian dollar (which is pegged to the U.S. dollar) as its currency. The majority of products that invest in Bermuda are materials-based funds though there are a handful of Chinese-focused ETFs that also set aside assets for this small region.
Narrowly missing out on third place, the Swiss come in with 214 funds with some kind of exposure. Despite its laundry list of achievements as a country, one of the highest GDP per capita figures in the world and ranked as the most competitive and innovative European nation in 2010, the country still has just one ETF dedicated to it [see Global Titans ETFdb Portfolio]. The MSCI Switzerland Index Fund (EWL) has assets nearing $500 million and an average daily volume of 220,000. Though there is only one fund focused on the nation of neutrality, there are a handful of ETFs that still feature significant exposure to this landlocked region. Switzerland is not a member of the European Union and still uses the franc as its currency. The franc had once been considered a safe have currency, but now that it is pegged to the euro, many investors feel that it has lost a bit of its luster [see also Safe Haven No More: Swiss Franc ETF Collapses On Peg To Euro].
The world’s most populated nation and perhaps most popular emerging market, China is a top ten country allocation in more than 200 products. ETFs have been instrumental in Chinese exposure as there are now products to corner nearly ever segment that the country has to offer. In fact, China has 16 products that are wholly focused on it, including nine sector funds and even a few that are dedicated to Hong Kong. Third place should not be a surprising result for the BRIC nation that has been one of the biggest growth stories in recent years. As investors have seen the benefit of developing markets in their portfolios, ETF investment in China have surged, as well as the options available [see Special Report: China ETFs In Focus].
Our neighbors to the north take a commanding second place as Canadian exposure is included in more than 250 ETFs. But what many may find surprising is that there are only five total products that are specifically designed for Canadian exposure. The rest, while featuring hefty allocations, have investment methodologies that take them elsewhere. A large number of products that invest in Canada are based in commodities or mining, as Canada is one of the most powerful mining nations in the world. Popular funds like GDX, GLDX, GDXJ, and SIL all offer more than 50% of their assets to Canada. Chances are, if you have a fund from our Commodity Producers Equities ETFdb Category, it will have a significant exposure to Canada [see also Commodity Guru ETFdb Portfolio].
1. The United Kingdom
Across the pond, investors will find more than 270 products that currently offer exposure to the British economy. The U.K. has one of the strongest currencies in the world with its pound and is among the ten biggest economies on the globe. But despite having the highest ETF representation of any foreign country, there is just one fund that is exclusive to the UK. The MSCI United Kingdom Index Fund (EWU) is a member of the billion dollar club ($1.2 billion to be exact) and has an average daily volume topping two million shares. As one of the world’s largest economies, the U.K. is remains largely underrepresented by the exchange traded industry. There are no small cap, sector-based, or alternative weighted options for investing in this global superpower. But if we know anything about the ETF industry, its that the coming years will see more innovation and likely more options to explore this space [see Three Long/Short Ideas For Euro Zone Debt Drama].
Disclosure: No positions at time of writing.