Published November 02, 2012
Earlier this year, PIMCO's Bill Gross said the U.S. is the cleanest dirty shirt in the world. That is to say amid Europe's sovereign debt crisis, Japan's own issues with rising debt burdens and demographic challenges and slowing growth in the emerging world, the U.S. is by comparison attractive.
The returns confirm that. Including dividends paid, the SPDR S&P 500 (SPY) is up 16.2 percent this year. SPY yields a piddly 1.98 percent, but investors have found comfort in U.S. equities amid tumult in other regions.
There have been a few other developed market shirts worth wearing this year. Predictably, that has meant taking on more risk and elevated volatility, but in some cases, the ends have justified the means.
PowerShares S&P International Developed Low Volatility Portfolio (IDLV) As the popularity of low volatility ETFs has grown, so have the chances that some of these funds can be overlooked. Arguably, that is what has happened to the PowerShares S&P International Developed Low Volatility Portfolio.
IDLV debuted in January and what looked to be one of the ETF's advantages has turned into a disadvantage. That being minimal exposure to Europe. As European equities rallied, IDLV offered investors little in the way of being able to participate in said rally. Still, this fund, which is heavy on Japan and Canada, has jumped almost 12 percent since its debut. The 30-day SEC yield of 3.69 percent is not too shabby, either.
Global X Norway ETF (NORW) If the U.S. is the cleanest of a bunch of dirty shirts on a global basis, then Norway is one of the cleaner European shirts. It is widely known that northern European countries have presented investors with far less risk than the PIIGS and Norway is no exception to that thesis.
Backed by a strong balance sheet, an under-appreciated sovereign wealth fund and the fact that it is not a Eurozone member, Norway has been a beacon of light in Europe this year. The country also maintains an AAA credit rating. NORW is up 13.5 percent year-to-date. If there is a black mark, it is this: NORW's volatility has been almost double that of SPY's.
Impressive is the fact that NORW has maintained its solid run over the past three months even in the face of falling oil prices. The ETF allocates 48 percent of its weight to the energy sector. Statoil (STO), Norway's state-run oil producer, accounts for almost 20 percent of the fund's weight.
Market Vectors Germany Small-Cap ETF (GERJ) And the award for best Germany ETF thus far in 2012 does not go to the iShares MSCI Germany Index Fund (EWG). That honor goes to the Market Vectors Germany Small-Cap ETF, which has outpaced the far larger EWG by nearly 550 basis points year-to-date.
GERJ is everything critics of small ETFs love to hate. It is small with its $5.4 million in AUM and is thinly traded. Average daily volume is just 420 shares and GERJ has not traded since Wednesday. Paying too much attention to external beauty, or lack thereof in this case, has meant ignoring what is on the inside with GERJ and that means a gain of over 25 percent. If German stocks stay in a eurozone leadership role, GERJ remains a preferred avenue for accessing the region's largest economy.
For more on Europe ETFs, click here.
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