With the iShares MSCI New Zealand Investable Market Index Fund ( ENZL), New Zealand just became the newest country available in an ETF to U.S.-based investors.

New Zealand has long been a quirky investment destination, with only Telecom Corp. of New Zealand ( NZT) easily accessible. If you read anything about New Zealand equities or the currency, you may get the sense it is a commodity-based economy, but that is not entirely correct. There is very little in the way of resources being taken out of the ground and exported to other countries (or used at home, for that matter). New Zealand is very much a farm-based economy, with more sheep than people and a free-trade agreement that sends a lot of dairy products to China.

The agricultural nature of the economy differs from a service-based economy such as the United States because demand for things grown on farms is far less cyclical than service-based sectors. This makes for an economy that is less volatile and creates the opportunity for better diversification. This played out as advertised as the benchmark NZ 50 Index dropped 40% from its 2007 peak versus 56% for the S&P 500, but by the same token the bounce-back in New Zealand last year was much less than in the U.S.

The new ETF will track an index from MSCI that is built differently, and better, than the NZ 50 benchmark, which is very heavy in real estate stocks. The largest sector in the new fund is materials at 23%, then telecom at 16%, discretionary at 14% and industrials at 13%. Having 23% in materials would seem to contradict the assertion New Zealand is not resource-based until you realize that almost 20% of the fund is in Fletcher Building, which makes construction materials such as cement and roofing. (As a side note, the recent earthquake in New Zealand's Christchurch could be a boon for Fletcher, and by extension for this ETF.)

The other massive holding in the fund is Telecom Corp. of New Zealand at 16% -- the entire telecom allocation. The reason the two stocks are so large? New Zealand is such a small market that the fund has only 23 holdings. It would be much more expensive than the current 0.55% if the fund had to buy some of the smaller stocks in the NZ 50.

The third-largest stock in the fund -- before they get really obscure -- is Auckland International Airport at 7%. Anyone interested in this fund should take the time to learn about Fletcher and Telecom.

Peculiarly, iShares won't be able to provide the full list of holdings until the end of September, just the top 10, nor do they have yield information for the underlying index. Based on the limited information provided, though, the fund will likely have a very high yield after accounting for the expense ratio.

While guessing what the yield will be is not productive, Fletcher Building yields 3.5%, Telecom yields 11% and Auckland Airport, Contact Energy -- another large holding -- and Fisher & Paykel Healthcare all yield 4%. Those five high-yielders account for 57% of the fund. New Zealand stocks have generally always offered a higher yield than U.S. stocks, but the dividends tend to be lumpier. A turndown in revenue in earnings would also likely mean a turndown in yield.

Investing in New Zealand typically means lower volatility and higher yields, but it has not been immune from cyclical downturns and won't be in the future.

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At the time of publication, Roger Nusbaum had no positions in the securities mentioned.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.

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