Investors Hone Country Fund Approach

Of all the nations in the world, no country-focused ETF has been spared in the market shake-up.

The SPDR S&P 500 ETF (SPY Quote), an exchange-traded fund that serves as a proxy for large-cap U.S. equities, is down 37.4% so far this year. The iShares MSCI United Kingdom Index Fund (EWU Quote) has fallen a staggering 43.8%. The iShares MSCI Japan Index Fund (EWJ Quote) and the iShares FTSE/Xinhua China 25 Index Fund (FXI Quote) have plunged 35.4% and 52.3%, respectively. Russia has been among the hardest hit. Investors in the Market Vectors Russia ETF (RSX Quote) have choked on a loss of 71.2%.

So with all this turmoil, how does an ETF investor gain international exposure? There is no easy answer, only arguments for which country or region looks most favorable for a rebound. "There have not been many places in the world where an investor could have escaped the declining equity markets so far in 2008," says Keith Walter, co-portfolio manager of the Artio Global Equity Fund ( BJGQX Quote). "We are struck by the consistency of the negative returns across all major markets without regard to the differences in underlying fundamentals."

In some cases, investors might find ETFs too broadly dispersed. For instance, Walter particularly likes certain pockets of Europe that may be difficult to capture in an ETF. "We are finding companies located in Central and Eastern Europe best illustrate a relative immunity to the current de-leveraging crisis," he says. ...