It’s the year of foreign equities ETF diversification and performance. For many ETF issuers, their international or ex-U.S. ETF strategies have led their suites for performance amid rising domestic risks. The spring swoon caused by tariff concern drove many investors to foreign markets and rewarded them with outperformance. While that highlighted the plethora of well-managed, broad international equities ETFs, it also underscored an interesting question: Is there a lack of single nation or region foreign equities ETFs?
Let’s look to VettaFi’s Country ETF List to dig in. Yes, you can invest in India or Japan or Argentina, even, with single ETFs. The list offers a lot of good information about the number of ETFs available in regional markets as well as single nations. What does it show?
It shows that the most popular countries are actually pretty well represented. India, a key emerging markets nation, has ETFs like the iShares MSCI India ETF (INDA ), with nearly $10 billion in AUM. Indeed, the category is arguably well covered, with three ETFs in the billions of AUM. The more one looks at the lists and categories, however, some questions start to emerge. There are 13 India ETFs, but their average three month return has been negative.
Meanwhile, France has just “one” ETF focused on its own market. The iShares MSCI France ETF (EWQ ) charges a 50 basis points (bps) fee to invest in a major market. While not as populous as India by a long shot, France houses some big names of its own, like LVMH Moet Hennessy Louis Vuitton SE (LVMUY).
EWQ launched almost 30 years ago and today remains the sole France ETF. While there are many cases where a European regional ETF can capture a lot of that France performance, it’s not always true; per YCharts, EWQ outperformed the Vanguard European Stock Index Fund ETF (VGK ) over the last 10 years.
It’s more than just whether enough ETFs exist for single markets, however. Entire regions and even continents have few options for ETF investors. Three equities ETFs on VettaFi’s country ETF list offer routes into Latin America, and only the iShares Latin America 40 ETF (ILF ) sits above $1 billion in AUM. The region has rewarded its investors on a YTD basis, up 27% per ETF Database. The Franklin FTSE Latin America ETF (FLLA ) meanwhile returned almost 30% in that time. Other ETFs could potentially even offer more — were there more options.
Perhaps the greatest white space remains, intriguingly, in Africa ETFs. According to the Country ETF list, just one ETF offers broad African equities exposure — the VanEck Africa Index ETF (AFK ). AFK has returned nearly 40% YTD, offering remarkable performance compared to other foreign equities ETFs. Only the iShares MSCI South Africa ETF (EZA ) stands out as an alternative within the Africa space.
Whether ETF issuers decide to offer a greater variety of ETFs to target foreign markets is an open question. With their performance this year, however, and the ever shrinking white space for ETFs, it may be worth revisiting foreign upside.
Originally published by Advisor Perspectives
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