Thriving Citizens Point To Regional ETF Opportunities With Healthy Returns

Includes: EIS, EWA, EWC, EWN, GXF
by: Robert Lavine

We have numerous measures of subjective well-being among citizens of different nations. If these measures are related in part to the strength of the local economy, they can provide a direction for investors looking to diversify their investments to foreign countries. As a bonus, countries whose citizens are thriving often have low levels of the corruption and political risk that can threaten productivity elsewhere. Regional or country-specific Exchange Traded Funds provide a convenient way to access such countries.

To look at this confluence of behavior and finance, I begin with a Gallup global survey of 2011 well-being polls, showing great differences among countries in how citizens rate themselves. The results are based on interviews with adults in 146 countries, in which people were asked to rate their lives from 0 (worst possible) to 10 (best possible). Individuals who rate their current lives as 7 or higher and their future as 8 or higher are considered "thriving."

Denmark, the top-ranking county on this list, has consistently led several global polls for well-being and happiness over many years. Here are the top six countries, along with the percent of people rated as thriving.

  1. Denmark - 74 percent
  2. Canada - 66 percent
  3. Netherlands - 66 percent
  4. Israel - 65 percent
  5. Sweden - 65 percent
  6. Australia - 64 percent

By comparison, the U.S. is 12th on the list, with 56 percent thriving. There is a wide range from Denmark at 74 percent to Cambodia at 2 percent.

Several regional and country-specific ETFs that target the top six countries are highlighted below, along with their 1-year total returns as of December 30, 2012, according to Yahoo Finance.

Denmark, Sweden, Norway, and Finland

Denmark, Sweden, Norway, and Finland are bundled together in the Global X FTSE Nordic 30 ETF (NYSEARCA:GXF), with a healthy 1-year return of 28.16% in 2012. These Scandinavian countries are relatively prosperous, educated, and among the happiest and least corrupt in international surveys. GXF has a modest 32 stocks in its basket, with $27.02 million in net assets, headed by the Danish health-care firm Novo Nordisk, a leader in diabetes care, at 13% of its assets (rounded). Statoil, a Norwegian oil and gas conglomerate with an international reach, and Sweden's Ericsson Telephone each contribute 6%. Sector-wise, its concentration in financial services, industrials, and health care account for 61% of its assets.


A number of ETFs provide access to this friendly country known for stability, banking and natural resources, but we are focusing on the popular iShares MSCI Canada Index Fund (NYSEARCA:EWC), with a 1-year return of 9.11%. This large-scale fund represents 101 stocks, with net assets of $4.48 billion, headed by the Royal Bank of Canada, Toronto Dominion Bank, and Bank of Nova Scotia, but also widely distributed to railroad, gold, potash, and other non-financial holdings. Its allocations to financial services, energy, and basic materials sectors account for 74% of its assets.


The iShares MSCI Netherlands Index Fund (NYSEARCA:EWN), with a 1-year return of 22.13%, represents 57 holdings with net assets of $148.36 million. It features a hefty concentration of 21% in Unilever, which has seen recent growth propelled by emerging market sales of well-known brands such as Dove, Vaseline, Lipton's, and Ben and Jerry's. Unilever contributes to this ETF's consumer defensive sector, which together with financial services and industrials accounts for 64% of its assets.


Israel, known for its dynamic pharmaceutical and high-tech companies, has advanced with an entrepreneurial work-force even in the face of a lack of natural resources and an unstable neighborhood. It joined other developed nations in the Organization for Economic Co-operation and Development in 2010. The iShares MSCI Israel Index Fund (NYSEARCA:EIS) has a 1-year return of 8.74% and 64 holdings, with net assets of $84.25 million. Its top three holdings in Teva Pharmaceuticals, a leading producer of generic drugs, Israel Chemicals, and Bank Hapoalim account for 41% of its assets. Its top three sectors are financials, health care, and materials, which together account for 70% of assets.


The well-known iShares MSCI Australia Index Fund (NYSEARCA:EWA) boasts a 1-year return of 24.11%. Its 73 holdings, with net assets of $2.35 billion, are fairly widely distributed, with its top three holdings of BHP Billiton, the world's largest mining company by 2011 revenue, Commonwealth Bank, and Westpac Banking accounting for 31% of total assets. EWA has a 67% concentration in the financial services, basic materials, and consumer defensive sectors. For investors who seek income, its recent dividend yield of 5.27% is not too shabby and the highest of the ETFs considered here.


Well-being, happiness, and life satisfaction have been linked to the "social capital" of social networks, and to trust, health, and work among other factors. Possible links to the health of the local economy suggest a look at ETFs for countries that lead in the percent of respondents seen as thriving, bearing in mind that these funds are subject to international as well as local factors. These funds differ widely in location, size, and major holdings.

Surveys of individuals' well-being can be influenced by when they are administered, how the questions are phrased and asked, sample choice, and cultural biases about answering personal questions. Looking only at six leading countries in Gallup's well-being survey and at specific ETFs in those countries are arbitrary choices, and many others are possible.

However, in times when diversification of investments is emphasized, the funds described here offer a variety of international financial opportunities that can be explored.

Note: Numbers are from Gallup, Yahoo! Finance, ETF Database, ETFScreen, and Microaxis, and vary with time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This article is not intended to provide financial advice. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.