Exchange traded funds that invest in the stocks and currencies of individual countries are gaining in popularity as investors turn to ETFs for specific trades or to hedge risk in their portfolios.
There are 139 ETFs specializing in non-U.S. equity markets or currency of a single country. That represents 11% of all ETFs, or $77.4 billion in assets, says Nicholas Colas, chief market strategist at ConvergEx Group.
These single-country funds “fulfill a key role in giving investors options for targeted exposure to a specific economy and/or currency while preserving the transparency and fee structures that make ETFs popular with institutional and retail investors,” he wrote in a recent note.
“And, in the context of trying to understand investor money flows, they give a very granular perspective on where investors think they have found winning trades,” Colas added.
Single-country funds are growing “far faster” than the average ETF in 2011. “Essentially, 7% of ETFs (single-country) are responsible for 15% of all new money into U.S.-listed products thus far in 2011,” he said.