iShares Plans Nordic Country ETFs

October 19, 2011


iShares, the world’s largest issuer of exchange-traded funds, filed regulatory paperwork with the Securities and Exchange Commission to bring to market three funds that track individual countries in Scandinavia, a region that has weathered the financial crisis relatively well.

The Scandinavian equity funds, targeting Denmark, Finland and Norway, are built on indexes consisting of stocks traded on each respective country’s stock exchange. The filings said that the proposed funds generally will invest 90 percent of their assets in the securities of their underlying indexes. The remaining assets may be invested in options, futures or swaps.

With the exception of Iceland, which essentially went bankrupt after the credit bubble of the past 10 years burst, Nordic countries have done comparatively well during the financial crisis. Norway is one of Europe’s biggest energy producers; Finland is home to Nokia, the cellphone manufacturer; and Denmark has a diversified economy including high-end manufacturing. Also, the entire region is richly forested.

The component companies of each of the Scandinavian indexes are diversified, and include sectors that play to the strengths of the countries on which they are based. For example, the Norwegian index includes energy companies; the Finish index includes information technology firms; and the Danish underlying index includes industrials.

The funds are passively managed and iShares estimates their tracking error will be no greater than 5 percent. However, because they use the increasingly popular representative tracking strategy as opposed to the traditional replication one, iShares’ filings warn that tracking errors can be higher than they otherwise might be.

The proposed funds linked to their respective registration statements include:

iShares MSCI Norway Capped Investable Market Index Fund

iShares MSCI Finland Capped Investable Market Index Fund

iShares MSCI Denmark Capped Investable Market Index Fund

The filings didn’t say what the ticker symbols or the annual expense ratios of the proposed funds would be.



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