A couple of months ago I wrote articles comparing country funds for Switzerland and South Africa vs the iShares for those countries, writes Roger Nusbaum. My take on both was that the country closed end fund was a better way to go (shortly after the South Africa article that CEF was liquidated).
Both CEFs had better performance and a higher payout. I thought it would be worthwhile to explore other countries and see what we see.
First up is Australia. There is the iShares (EWA) and Aberdeen Australia Equity Fund (IAF). This is not exactly apples to apples because IAF invests some of its assets in debt and other countries. EWA has slightly out performed over the last five years but IAF yields 8.5% compared to 3.44% for EWA. I looked in several places to see if IAF uses leverage, but found no data. The 8% may be due to capital gains paid by the fund. Call it a push. My clients and I have exposure to Australia.
Next is Brazil. The iShares is EWZ and there are two country funds, BZF and BZL. BZF has been, by far the best performer followed by BZL and then EWZ. All three yield in the neighborhood of 2% but BZF has the highest at 2.3%. All my clients have exposure to Brazil.
Germany, similar to Brazil, has one iShares (EWG) and two CEFs, GER and GF. The order of performers is GF, EWG and GER. GF has paid a couple of large capital gains over the years but none of the three has much of a yield. Neither I nor my clients own Germany.
The most confounding foreign country has to be Japan. Again one iShares (EWJ) and two CEFs, JEQ and JOF (which focuses on smaller companies). I have so little interest in Japan I'm not even going to look at them. If Japan ever gets it together, it can happen without me.
Malaysia has and iShares (EWM) and one CEF, MF. Again, the slight nod goes to the CEF. The iShares out yields the CEF 2% to 1%. Some clients have minimal exposure to Malaysia through an broad emerging market ETF.
Mexico is interesting to me, there is an iShares (EWW) and two CEFs, MXF and MXE. MXE beats EWW and MXF by a mile, performance wise. EWW is the only one with any yield, 1%. Some clients have exposure to Mexico.
Singapore has one of each, EWS and SGF. The CEF takes it by a wide margin. Both Yahoo Finance and ETF Connect know the yield of the iShares at close to 4%, which doesn't seem right to me, while the CEF yields 2.4%. No direct exposure.
Plenty to choose from in South Korea. There is iShares (EWY) and two CEFs, KF and KEF. Both CEFs beat the iShares. KF is the only one with any kind of yield at 1.79%. While we have no direct exposure I think I'd rather own Posco (PKX) instead.
There are a lot of regional CEF and iShares, and other countries represented by either CEFs or iShares but not both. The point of this tedious post is to illustrate that if you are looking to invest long in a country, as opposed to a quick short sale, don't forget about CEFs. More often than not, based on my unscientific research, the CEF is the better alternative.