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May 1, 2023

Look Abroad To Reduce Local Risks: Country Funds Add Geographic Diversification

by Richard Morrison

Investors typically hold stocks, bonds and funds that are tied to their home country. This preference for domestic securities, called home bias, has served Canadians and Americans well over the long term. Many of us make no effort to invest beyond these two countries, arguing that global diversification, if it is desirable at all, can be achieved by owning shares in giant U.S. corporations and Canadian resource companies that have operations around the world. After all, the managers of these multinationals travel constantly and ought to be able to recognize regional risks and opportunities when they see them.

Canadians often regard developing markets as particularly risky, as along with political risks, fraudsters who want to pass off barren lands or empty factories as booming businesses often put them in jungles and mountain ranges in far off lands that are difficult for analysts to reach.

Despite these fears there is no question that U.S. stock markets have a dominant global influence, especially here. Canadians may find that holding assets from other countries is a good way to diversify against a local downturn.

Canadian investors willing to look beyond our borders can take a basket approach and invest in exchange-traded funds that hold companies from around the world, either with or without U.S. names. Generally, ETFs that have International in their titles exclude U.S. companies while those with Global in their names include them. 

Those seeking an edge over the market may consider ETFs that focus on specific countries, whose diversified portfolios, while concentrated, are less risky than individual foreign stocks. Foreign investing always presents political and currency risk, however, making such funds suitable as only a small part of a risk-tolerant investor’s portfolio. 

BlackRock’s iShares unit dominates this market. The iShares catalogue includes five funds linked to specific sectors in China, four to Japan, three to India and the U.K., two to Brazil and Germany, along with single funds for another 36 countries. 

Global X, which specializes in thematic ETFs, offers several funds connected to the Chinese economy and single ETFs that track the fortunes of Germany, Norway, Portugal, Greece, Argentina, Columbia, Vietnam, Pakistan and Nigeria. Country offerings are also available from SPDR (China), VanEck (Indonesia, Vietnam) and Invesco (India).

Over the long term, countries with democratic, relatively honest governments are generally less risky than emerging nations. Over shorter periods, however, any country fund can make money for investors. For example, the Global X MSCI Nigeria ETF (NGE) is up about 19% so far this year, despite the fact that Nigeria ranks a poor 150th out of 180 countries on Transparency International’s Corruption Index for 2022 (

Investors seeking the least corrupt nations will find Denmark tops Transparency’s list, followed by Finland, New Zealand, Norway, Singapore and Sweden. Canada ranks 14th on the list while the U.S. comes in at 24th. Over the past decade, the perceived level of corruption has either stayed the same or worsened in 155 of 180 countries, while in 26 countries corruption has reached its worst recorded level, Transparency says.

Investors can see a country’s economic prospects at the Organization for Economic Co-operation and Development (, the International Monetary Fund ( or the European Commission ( Along with a country’s level of corruption and economic prospects, life expectancy, education and gross national income per capita are also worthy of consideration. The aim of the United Nations Human Development Index ( is to highlight those countries most in need of assistance but the index can be used to assess investability. Switzerland tops the HDI list for 2022, followed by Norway, Iceland, Hong Kong, Australia, Denmark, Sweden, Ireland, Germany and Netherlands.

Investors can check the performance of country ETFs at Seeking Alpha ( which tracks each fund’s performance in real time or as of the previous day’s close. Seeking Alpha also offers links to investment news and analysis about each country. 

Here is a brief look at some of the best performers on Seeking Alpha’s list.

Global X MSCI Argentina ETF (ARGT)

This fund’s unit price has climbed steadily since last summer despite Argentina’s struggling economy. The cost of living in Argentina has almost doubled over the past year, its worst inflation in more than 30 years. The inflation will constrict consumption and investment, the OECD’s snapshot for Argentina says. Nevertheless, Global X Argentina’s unit price has climbed 19% so far this year, making it suited to momentum investors who don’t worry much about economic fundamentals. 

Launched in 2011, ARGT has US$48.1 million invested in 29 Argentine companies, with 36% in the consumer cyclical sector, 16.1% in consumer staples and smaller weightings in materials, financials, energy and utilities. The fund holds more than 25% of its assets in ecommerce giant Mercadolibre Inc., essentially a South American blend of Amazon and EBay. Mercadolibre’s shares (MELI/NASDAQ) were up 59.1% in 2023 as of the end of March. The fund carries a total expense ratio of 0.59% against a yield of about 2.1%.

iShares MSCI Denmark Capped ETF (EDEN)

Denmark, a perennial leader in Transparency International’s list of least corrupt countries, managed to expand its gross domestic product by 3.1% in 2022, largely due to a positive carry-over from 2021, the European Commission’s economic forecast for Denmark says. The growth should flatten this year then climb to 1.6% in 2024, the EC predicts.

The iShares Denmark fund, launched in 2012, has US$234 million invested in 56 Danish companies, with a full 25% in pharmaceutical giant Novo Nordisk and smaller allocations to wind turbine maker Vestas Wind Systems, brewer Carlsberg AS and Maersk, whose names appear on ships and shipping containers around the world.

The unit price of the fund, whose ticker is often confused with the EDEN cryptocurrency, plunged to about US$75 last September but has since rallied to above US$100. 

The fund carries a management expense ratio (MER) of 0.53% while its semi-annual distribution yields 1.34%.

Global X MSCI Greece ETF (GREK)

Greece’s economy recorded solid growth in the first half of 2022 but inflation slowed growth in the second half, the European Commission’s 2023 forecast says. Despite the slowdown, Greece’s real GDP likely grew by 5.5% in 2022. Tourism is expected to rebound in 2023 and 2024, when exports should start picking up. Real GDP is forecast to grow by 1.2% in 2023 and 2.2% in 2024, the EC’s report says.

The Global X Greece ETF, launched in 2011, has US$154.2 million invested in 29 Greek companies, including banks, telecom companies, a gambling company and an oil refiner.

Like the iShares Denmark fund, the unit price of GREK fell in late September but has climbed steadily since then.

The fund carries an MER of 0.57% but pays out a semi-annual distribution that yields 2.5%.

iShares MSCI Mexico Capped ETF (EWW)

Mexico’s real GDP growth is likely to slow from 2.5% in 2022 to 1.6% in 2023, then climb to 2.1% in 2024, the OECD’s economic forecast for the country says. Inflation of more than eight per cent should fall to 5.7% in 2023 and 3.3% in 2024, it adds.

The iShares Mexico fund was an early country fund at its launch in 1996. The fund has US$1.2 billion invested in 51 Mexican companies, broadly diversified among the financial, communication, consumer staples, industrials and real estate sectors. Telecom giant América Móvil is its largest holding.

Like many other country funds, EWW’s unit price has climbed steadily since last summer but while other country funds’ unit prices have levelled off, EWW’s has jumped in 2023.

The fund carries an MER of 0.5% and pays out a semi-annual distribution that yields 3.1%.


As Warren Buffett said recently “I have yet to see a time when it made sense to make a long-term bet against America,” and for many Canadians a portfolio made up exclusively of Canadian and American securities has served them well. Occasionally, however, it may be worthwhile to explore investment opportunities beyond our borders – and country funds fit the bill.


Richard Morrison, CIM, is a former editor and investment columnist at the Financial Post.