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Investing with ETFs: Sweden

Sweden is the most developed and active market the region with 22 listed ETFs offering exposure to the Nordic markets

Hortense Bioy, CFA 30.11.2010 | 11:33

Those interested in the well-funded, export-driven Swedish economy could look at XACT OMXS30, which holds the 30 largest equities on the Stockholm stock exchange. It is a well-diversified fund with half of its weighting in the industrial and financial sectors. The top 10 holdings comprise 66% of the portfolio, which includes major names such as H&M  (13.7%), Nordea Bank (10.3%), Ericsson (8%) and Volvo (5.2%). XACT OMXS30 is the largest ETF within the Nordic region with some EUR 700 million of assets under management. It is also the most actively-traded non-leveraged fund on the Stockholm stock exchange.

Those seeking similar exposure could look at its smaller and less liquid sister fund XACT OMXSB, which currently tracks the performance of the 89 largest shares in Sweden. This ETF is slightly less top heavy than the aforementioned XACT OMXS30, with the top 10 holdings comprising 50.8% of the portfolio, but it offers very similar return and risk characteristics.

For active traders who have a very high risk tolerance, XACT offers leveraged and inverse ETFs listed in Stockholm. Despite their risks, these funds have proved very popular among local retail investors, as evidenced by the high number of relatively small daily trades.

The best performer so far this year is XACT Bull 2, with a gain of 31.6% (lokal avkastning). This fund provides daily exposure equivalent to double the return of the OMXS30. So, if the index goes up 1% during a given trading day, the fund will go up 2%, and vice versa. However investors should be aware that because of the daily rebalancing and the compounding arithmetic, they are not guaranteed to get twice the index's return for any holding period longer than one day.

Not surprisingly, the worst performing ETF in Sweden this year is XACT Bear 2, with a loss of 34.6%. This fund gives a daily exposure equal to twice the inverse return of the OMXS30. So, if the index goes down 1% during a given trading day, the fund will go up 2%, and vice versa. XACT Bear 2 has limited usefulness. It can only provide a (very) short-term hedge for investors looking to protect a portfolio consisting mostly of Swedish equities if the market falls. It could also be used for speculating against Sweden’s large-cap market by those who are bearish on its near-term (again, very near-term) prospects.

Sweden’s other ETF issuer HQ offers alternatives to some of XACT funds. However they are smaller and enjoy less liquidity, as measured by the average 3-month daily trading volume. TERs across both firms’ product lines are identical. 

 

Les også om finske og danske, norske, nordiske og en oversiktsartikkel (norsk tekst).

Om forfatteren

Hortense Bioy, CFA

Hortense Bioy, CFA  is director of passive fund research in Europe.