Danish Dominance in an ETF

ETF Trends

As of Saturday, Denmark had not won a single medal in the 2014 Winter Olympics. The other Nordic nations that are also tracked by U.S.-listed exchange traded funds – Norway, Sweden and Finland – had a combined 45 medals.

Denmark can, however, claim a gold medal in another area of competition: ETF performance. The oft-overlooked iShares MSCI Denmark Capped ETF (EDEN) has jumped nearly 11% this year. EDEN’s 2014 performance has been more than five times that of the iShares MSCI Sweden ETF (EWD) , the largest single-country ETF tracking a Nordic nation. [Sweet on the Sweden ETF]

In January, Danish stocks were the best performers in developed Europe on a weighted average return basis, but this is not new territory for stocks in Denmark. In terms of 2013 total shareholder return, only Japan, Finland, the U.S. and Spain beat Denmark.

One reason for EDEN’s impressive returns is its health care exposure, which checks in at almost 41%. The ETF’s largest holding, Danish pharmaceuticals giant Novo Nordisk (NVO), accounts for over 24% of the fund’s weight, more than triple the weight given to any of the ETF’s other 37 holdings. Those are advantages in a year when investors have prized health care stocks and ETFs. [Health Care ETFs Lead the Way]

AAA-rated Denmark has helped another ETF stand firm as well. The Guggenheim Shipping ETF (SEA) has traded slightly higher this year despite sell-offs in some major global shipping indices. Denmark is SEA’s largest country weight and AP Moeller-Maersk is the fund’s largest holding at 20.4%. That stock is EDEN’s third-largest holding.

EDEN offers investors another rarely highlighted advantage. Although it is not a currency hedged ETF, the fund has benefited from Denmark’s krone being pegged to the euro, a source of consternation for Denmark’s Nordic neighbors. The euro has risen steadily against the Danish krone over the past two years, benefiting Danish exporters along the way.

Over that time, EDEN has surged almost 70%. As the euro gained strength against the krone last year, EDEN was one of the 10 best single-country ETFs tracking a European nation. [Europe's 10 Best Country ETFs]

To be fair, EDEN is not a risk-free bet. Household debt is on the rise in Nordic countries and there is a dearth of quality targets for Denmark’s healthiest large banks to acquire. The financial services sector accounts for 15.4% of EDEN’s weight.

EDEN has $22.1 million in assets and charges 0.53% per year.

iShares MSCI Denmark Capped ETF

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