US-Listed ETFs Sorted by Asset Class and Year-to-Date Return

dia. They’re more developed countries
from that standpoint.” In other words,
the Eastern European economies offer a
more developed tilt, which may be preferable
to those worried about the fate of
less established economies.
The other benefit of holding those
countries is getting exposure to a diversity
of economic structures, which could help
insulate against a downturn in Russia’s
dominant materials or energy industries.
Eastern European countries tend to have a
strong showing in the financial sector—the
iShares MSCI Poland Investable Market Index
ETF (NYSE Arca: EPOL) has more than
40 percent weight in financials—and they
also tend to be more leveraged to their
trade partners in Western Europe, which
means more revenue from manufacturing.
Old World Made New
For investors looking for real diversification,
the current crop of Russia-dominated
emerging Europe ETFs, with few singlecountry
alternatives, simply falls short. In
part, that’s just due to the nature of the region—a
landscape dotted with small countries
with correspondingly small economies.
Some of the countries simply don’t have
economies large enough to take as large
an influx of U.S. investor dollars as we’ve
seen in other “hot” countries like Brazil and
Indonesia. But this may be changing.
ETF issuers could venture into slightly
smaller territory. Countries such as Ukraine
and Romania seem ripe for inclusion (in
fact, Ukraine is already a very small part of
ESR’s current basket), and would provide
genuine (although not riskless) diversification
in emerging Europe. Emerging Europe
is also an interesting place for alternative
weighting schemes. Equal-weighting, for
instance, would mitigate Russia’s influence
over a broad-based fund and give
those funds a more attractive balance.
The other possible good news is that
there may be a new option on the ETF
horizon: an emerging Europe ex-Russia
ETF. Van Eck has filed paperwork with
the Securities and Exchange Commission
to launch just such a fund; however, the
fund has been in registration for three
years, with no sign of launching. Should
it launch, the fund could mark a turning
point for emerging Europe ETFs, ushering
in a new era of funds offering a more balanced
and diversified take on an area that
has no shortage of reasons to invest.
Eurozone from page 10
Figure 3
Sector Weights
Sector Eurozone Pan-European Eurozone/Pan-European Difference
Financials 24.27% 22.58% 1.69%
Consumer Staples 9.02% 11.56% -2.54%
Energy 8.45% 13.80% -5.35%
Industrials 12.18% 8.22% 3.96%
Materials 8.57% 9.87% -1.30%
Health Care 6.01% 12.86% -6.85%
Consumer Discretionary 9.98% 5.39% 4.59%
Telecommunication Services 7.93% 8.05% -0.12%
Utilities 9.12% 3.89% 5.23%
Information Tech 4.32% 3.64% 0.67%
Sources: iShares, PowerShares, SSgA and Vanguard. Data as of 3/25/2011. Eurozone and pan-European weights are averaged ETF weights.
has reached its apex. Put more simply, the
difference between the euro, the pound
and the Swiss franc is less dramatic than
that between the U.S. dollar or the yen.
Choosing Your View
Even with the similar returns, syncing your
vision of European exposure with the available
options is important. In the short term,
it’s rare that sector differences will affect
one country—a technology breakdown
won’t affect just Norway, for example. And
while the Nordic countries stand just slightly
apart from the eurozone, their impact on
a given fund’s holdings is light, at best.
When looking toward future exposure,
your choice comes down to how you feel
about the United Kingdom and the continued
strength of the British pound. As long
as England stands outside of the eurozone,
your choices will remain divided. But if the
U.K. decides to join the EU, investors may
once again have a more unified view for
European investments.
12 ETFR • May 2011