Irish Prime Minister Resigns: ETF in Focus

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Ireland’s Prime Minister, Enda Kenny has confirmed that he will be stepping down as the leader of his party, Fine Gael and subsequently as the premier of the country, as soon as a successor is chosen.

Kenny, who has been Prime Minister since 2011, helped the country to fight recession following the global financial crisis. He has been applauded by investors for the way he handled the issues faced by the country and for his role in stabilizing the economy.

However, he was criticized by his fellow party members for the way he handled a whistleblower case involving the National Police Service. Moreover, his inability to secure a majority in the 2016 elections added to the pressure.

The two frontrunners contesting to replace Kenny as Taoiseach, the official title of the Irish Prime Minister, are Simon Coveney and Leo Varadkar. Coveney is the current housing minister whereas Varadkar is the current social protection minister.

Whoever replaces Kenny on June 2, 2017 will inherit a strong and fundamentally resilient economy. The European Commission has predicted that the Irish economy will grow 4% this year. However, the fact that Kenny leads a minority government and has a deal with the opposition party Fianna Fail results in  uncertainty. If the two parties do not come to a consensus on Kenny’s successor, Fianna Fail could use its veto to trigger national elections.

Amid the uncertainty surrounding Irish politics, let us discuss the most popular Ireland focused ETF, EIRL (see all European Equity ETFs here).

iShares MSCI Ireland Capped ETF EIRL

This fund offers exposure to equities based out of Ireland, thus a pure play on the Irish economy.

It has AUM of $66.48 million and charges a fee of 48 basis points a year. The fund bears significant concentration risk, evident from the fact that it holds a mere 25 securities in its portfolio. Materials, Consumer Staples, and Industrials are the top three sectors of this fund with 26.15%, 23.79%, and 15.86% allocation, respectively (as of May 16, 2017). The top three holdings for the fund are CRH PLC, Kerry Group PLC, and Paddy Power Betfair PLC, with 22.01%, 14.13%, and 8.88% allocation, respectively (as of May 16, 2017). The fund returned 13.70% in the year-to-date time frame and 9.61% in the past one year (as of May 17, 2017).

Let us now compare the performance of the fund to a broad-based European ETF (read: Do Europe ETFs Have More Upside?).

ProShares MSCI Europe Dividend Growers ETF EUDV

This fund provides exposure to European equities that have constantly grown their dividend yields for a minimum of 10 consecutive years.

It has AUM of $5.57 million and charges a fee of 55 basis points a year. This fund reflects overall sentiment in the European region. From a geographical perspective, it has high exposure to United Kingdom, Switzerland, and France with 46.80%, 13.04%, and 11.35% allocation respectively (as of March 31, 2017). The fund has a 4.47% exposure to Ireland. Industrials, Health Care, and Consumer Staples are the top three sectors of this fund with 20.50%, 19.53%, and 17.83% allocation, respectively (as of March 31, 2017). The top three holdings for the fund are Inmarsat PLC, Sky PLC, and Cobham PLC, with 2.79%, 2.74%, and 2.47% allocation, respectively (as of March 31, 2017). The fund returned 15.26% in the year-to-date time frame and 6.10% in the past one year (as of May 17, 2017) (read: Is the ECJ Ruling Good News for British ETFs?).

Below is a chart comparing the year-to-date performance of the two funds.

Source: Yahoo Finance

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PRO-SH EUR DV G (EUDV): ETF Research Reports
 
ISHARS-MS IRLND (EIRL): ETF Research Reports
 
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