Why Buy iShares MSCI Norway ETF (ENOR)?

The iShares MSCI Norway ETF is part of BlackRock’s iShare ETF (ENOR) stable of investment vehicles designed to facilitate tax-efficient and low-cost exposure to a vast range of the world’s most important investment markets. 

BlackRock’s various exchange-traded funds (ETFs) are known throughout the financial industry for delivering superior results compared to their ETF peers and to other mutual fund alternatives. In fact, iShares core ETFs performed better than 76% of its competitors over the last five years, and only 5.6% of its funds paid capital gains versus 54% of mutual funds over the same period.

The aim of the Norway fund is to expose investors to a broad range of Norwegian assets and companies, provide targeted access to specific stocks, and ultimately to express the flavor of a single country’s market economy.

What Are iShares MSCI Norway ETF Holdings?

The Norway ETF is designed to track the benchmark MSCI Norway IMI 25/50 Index which itself is intended to cover the performance of large, small and mid-cap sectors of the Norwegian Market.

There are rules in place which stipulate how the MSCI Norway IMI 25/50 Index can allocate weightings to its portfolio of stocks. A maximum of only 25% of the fund’s total assets can be invested in any one issuer, and the total weights of all issuers individually above 5% of the fund must not together make up more than 50% of the total fund assets.

Because of this, the MSCI Norway IMI 25/50 Index is not perfectly balanced according to market capitalization; but it does tend to reflect an underlying relationship between the companies represented. The index is adjusted and reweighted on a quarterly basis.

This brings us to the kind of stocks and assets that do actually appear in the ETF, and since the fund tracks the biggest firms in the Norwegian economy, it’s no surprise to see energy stocks and materials companies figure highly on the list.

The partially state-owned energy sector company Equinor (EQNR), with a weight of 11.84% and a market value of $5.2 million, sits at the top of the fund. Featuring prominently in the ETFs top-10 are companies such as Norsk Hydro (NHYDY), an aluminium and renewable energy operation, and Tomra Systems (TMRAY), a world leader in recycling and reverse vending.

ENOR currently has a total of 56 holdings on its portfolio, with net assets of a little over $44 million. It trades on the CBOE U.S. Equities Exchange and has 1,550,000 shares outstanding.

How Has The iShares MSCI Norway ETF Performed?

The fund has delivered an average annual total 1-year return of 80.11% to investors, although this was significantly less over 3- and 5-year time frames of just 4.27% and 10.12% respectively. Cumulative total return for the year-to-date currently stands at 9.23%.

With a P/E ratio of 19.27 and a Price-to-book multiple of 2.05, the fund is certainly trading at a premium on the basis of these fundamental metrics. But this has to be weighed against its recent high annual returns and its equity beta. On that note, its 3-year equity beta of 1.17 suggests some inherent volatility to the vehicle, and this might account for fluctuating returns the ETF has delivered.

Many of the iShares investment funds now take a measure of what it calls its “Sustainability Characteristics”. These metrics are meant to enable investors to calibrate certain non-financial and sustainable ideas into their investing thesis. 

As the wider investing community becomes more cognizant of these characteristics, it is likely that more money will flow into the most high scoring funds and provide cash liquidity in the process. As such, even though these metrics don’t necessarily influence how the fund will perform, they can be important in raising trading volumes in the ETF which is often a bonus for investors.

Therefore, it serves to recognize that the Norway Fund scores fairly high on these considerations. Its MSCI ESG Fund Rating is the highest with a rating of AAA, and its MSCI ESG Quality Score (0-10) is a pretty large 8.8.

Why Buy iShares MSCI Norway ETF

The world’s largest sovereign wealth fund is held by Norway. Its Oil Fund, or the Government Pension Fund Global, pours surplus cash from its petroleum industry into an investment scheme that invests in assets the word over.

Although the iShare Norway Fund doesn’t follow the stocks that the Norwegian Oil Fund does, it does provide some broad exposure to the companies that are generating the revenues that pay for it. Additionally, the diversified nature of the iShare vehicle also mitigates against the fluctuating fortunes of the oil sector and the companies operating therein. 

So, for an investor seeking the upside of the Norwegian hydrocarbons industry, but who also wants to avoid the risk of a notoriously fickle oil market, the iShares MSCI Norway ETF provides a good halfway house.

Furthermore, as one of iShares commission-free ETFs, investors can trade the fund with many different brokers, and not pay a cent in costs. ENOR does come with a management fee, however, giving it an expense ratio of 0.53%. This is about the mid-range for a typical ETF, therefore making the privilege of no-commission trading quite attractive.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.