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Europe Funds Highlight Flaws Of Judging ETFs On Size

August 26, 2013 3:08 pm
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Exchange traded funds offering exposure to eurozone nations, yes, even the PIIGS, have recently delivered some impressive performances. Solid economic data, compelling valuations and investors' thirst for international exposure that is not of the U.S., Japan, or emerging markets varieties have been among the catalysts boosting Europe ETFs.

Indeed, some of the more prominent Europe ETFs, a roster including the Vanguard FTSE Europe ETF (NYSE: VGK) and the iShares MSCI EMU ETF (NYSE: EZU), have been among the Europe ETF leaders.

So have a plethora of small ETFs that some critics would have advised investors to ignore based on size alone. As has been proven before and as the following funds prove yet again, evaluating an ETF based on its size, or thinking that ETFs with large asset totals are "better" than smaller funds, can be only be described with negative adjectives that will not be repeated here. The returns, however, speak for themselves.

Related: Ignoring Sub-$100M ETFs A Costly Idea.

iShares MSCI Ireland Capped ETF (NYSE: EIRL)
Earlier today, the iShares MSCI Ireland Capped ETF touched $32.35. That is not just a new 52-week high, but a new all-time for the lone ETF tracking a country that was once viewed as one of the worst offenders in the European sovereign debt crisis.

EIRL has just under $86 million in assets under management, so it is safe to say plenty of pros avoided this fund while keeping clients out of it as well. That is a mistake of epic proportions because EIRL is up 26.6 percent this year, a performance that trounces that of the S&P 500. Over the past 90 days, EIRL is up 8.5 percent. That is better than triple the returns offered by the comparable Switzerland ETF over the same time and seven times the returns of the iShares MSCI United Kingdom ETF (NYSE: EWU).

Since May 24, EIRL has also soundly outpaced the equivalent France, Germany and Italy ETFs.

WisdomTree Europe SmallCap Dividend Fund (NYSE: DFE)
The WisdomTree Europe SmallCap Dividend Fund has nearly $101 million in assets under management, perhaps just enough to assuage the "size is important when selecting ETFs" crowd. What is really important that DFE is an ETF that is delivering under the radar upside. DFE has jumped nearly 12 percent since we highlighted the fund in February.

DFE is also up nearly nine percent since May when it is mentioned as one of the better global small-cap funds.

DFE has a 3.64 percent 30-day SEC yield. The ETF's top-five country weights are the U.K., Sweden, Italy, Germany and Norway, a group that combines for over 69 percent of the fund's weight. DFE offers exposure to 16 countries, six of which are not eurozone members.

iShares MSCI Finland Capped ETF (BATS: EFNL)
Plenty of investors do not even know the iShares MSCI Finland Capped ETF exists. Others forget that Finland, unlike the other Nordic nations that are investable via ETFs, is a eurozone member. Still, others forget that Finland, unlike the U.S., France or Japan, has an AAA credit rating.

EFNL is about 60 cents below its all-time high and has surged 28.1 percent in the past year. For those focusing on more recent time horizons, the lone Finland ETF is up 6.6 percent in the past month despite having just $10.1 million in assets under management. And no, Nokia (NYSE: NOK) is EFNL's largest holding. The cellphone giant is the ETF's second-largest holding behind Sampo Oyj.

For more on ETFs, click here.

Disclosure: Author owns none of the securities mentioned here.

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