Northern Trust's Single-Country ETFs Based on 'Flagship' Indexes

Following the footsteps of Barclays, State Street and Vanguard Group, the Chicago-based Northern Trust became the latest financial services giant to enter the rapidly growing world of ETF (Exchange Traded Fund).

Northern Trust came up with offerings that follow locally recognized indexes for foreign markets such as the U.K, Japan and Germany. Several other funds are in registration, including broader international-stock ETFs and real-estate portfolios.

Northern Trust's strategy for its first ETFs is to go with whichever local indexes are best-known (the 'flagship' index) among investors in a particular country, much like the Dow Jones Industrial Average is for USA. Northern Trust, as of last Friday, managed a dozen Northern Exchange Traded Shares, or Nets, such as Nets DAX for Germany (DAX), Nets CAC 40 for France (FRC) and Nets FTSE 100 for the U.K. (LDN) and Nets Topix (TYI) for Japan. The company has filed for more individual country funds, like Portugal and Israel.

Although less diversified than other international ETFs, single-country ETFs are usually diversified by companies and sectors within that country. Investors seeking targeted exposure to specific countries or customized portfolios of groups of countries may find such ETFs as attractive investment vehicles.

It would be interesting to observe how the new ETFs of Northern Trust would fare in what is already a packed field dominated, in particular, by Barclays Global Investors with its own family of iShare series of ETFs tied to single-country benchmarks, most of which are already quite popular with investors.