First Nordic ETF To Take On Active Mutual Fund Field

By
Murray Coleman
August 18, 2009
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Global X Nordic ETF tracks a FTSE index that's clobbering its actively managed rival.

 

The first pure-play exchange-traded fund focused just on the Nordic region of Europe is set to launch on Wednesday.

And if past performance is any indicator, the new index-based ETF should prove to be a worthy challenger to the other main Nordic-centric contender competing for fund investors’ dollars. (See table below.)

The Global X FTSE Nordic 30 ETF (NYSEArca: GXF) will charge an expense ratio of 0.50%. It tracks a long-standing benchmark for Nordic markets created and maintained by the FTSE Group. The 30 largest companies by market-cap size and liquidity in the region are included.

While this will be the first ETF launched in the U.S. for Nordic companies, there’s actually an actively managed mutual fund focusing on the region. That’s the Fidelity Nordic Fund (FNORX). It has an expense ratio of 1.09% per year – more than double what the ETF is charging.

How’s it doing compared to GXF’s underlying index? In the past five years through July 31, it had gained 7.51% on an average annualized basis. That compared to the FTSE Nordic 30 Index’s 9.40% average annualized return in the same time period.

The FTSE Developed Europe Index had an average annualized return of 5.90% during that time, according to FTSE data. Meanwhile, the S&P 500 lost 0.10% in that period.

Here’s a table of the average annualized returns for each index and the Fidelity mutual fund through July:

 

Period

FTSE Nordic 30 Index

FNORX

FTSE Developed Europe Index

S&P 500 Index

YTD

34.90%

27.46%

19.30%

11.00%

12-Month

-26.10%

-33.63%

-24.60%

-20.00%

3-Year

-2.00%

-5.91%

-4.90%

-6.20%

5-Year

9.40%

7.51%

5.90%

-0.10%

Source:s Fidelity, FTSE Group, Thomson

 

What's so hot about Nordic economies as a region?

“The global leadership in innovation and training of the Nordic workforce positions the region to continue to capture the growth opportunities of the global economy in the future,” said Bruno del Ama, Global X's chief executive.

Denmark, Sweden and Finland are all listed as the top three countries in terms of higher educational systems and employee training programs in the world by the World Economic Forum, del Ama added.

The index is rebalanced semiannually. Most of the component companies are listed on local exchanges and not available directly through U.S. listings. The benchmark includes caps on how big one component company can be at any given time. The largest company at the end of July was Sweden's Nordea Bank, at 10%.

Other leading names were: Novo-Nordisk (8%); Nokia (8%); Ericsson (8%) and Norway’s Statoil Hydro (7%).

GXF will represent the second ETF that the New York-based start-up Global X is sponsoring. In February, its first fund came out, the Global X/InterBolsa FTSE Colombia ETF (NYSE Arca: GXG). Besides the Nordic region, the firm has plans to enter at least four more different emerging markets. (See related story here.)


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