In a recent screen of Value Line’s European Objective group, Fidelity Nordic Fund (FNORX) turned up as one of the top performers. While the fund’s focus on Danish, Finnish, Norwegian, and Swedish securities makes it far more focused than the average European fund, that may be a reason to take a second look. Indeed, the fund highlights a somewhat unique section of Europe that may deserve additional focus from investors.
Specifically, these countries share a long history that ties them culturally, religiously, and economically in a way that is different than the ties between the rest of the European nations. That isn’t to say that these similarities are better or worse, only that countries of the Nordic region are, perhaps, more similar to each other than they are to the other countries of the Continent. In fact, in a recent shareholder report, Fidelity made a point of highlighting that increased global competition has led these nations to reassess their “historically generous” welfare programs. This, in turn, has likely hurt domestic demand and employment.
Of course, the economic factors that have affected the Nordic region have been issues throughout Europe, too. So welfare, domestic demand, and unemployment are not unique to the Danish, Finnish, Norwegian, and Swedish markets. That said, these are relatively small countries and such problems can have an outsized impact. In addition, countries in the region tend to be focused on forestry, agriculture, and oil production. They are, thus, as a group, heavily resource-dependent. This can be both a blessing and curse, depending on which way commodity prices are trending.
Fidelity Nordic Fund primarily invests in common stocks. The manager uses fundamental analysis when making selections. Factors such as a company’s financial condition and industry position are considered. However, larger industry, country, and world-wide developments are also considered in the process. By prospectus, the fund is allowed to engage in currency hedging. The fund is, obviously, highly focused on a select region, though Fidelity makes particular effort to point out that the fund may invest up to 35% of its total assets in any industry that represents more than 20% of the Nordic market. So, while the fund is generally a diversified way to invest in the region, it has the ability to focus its individual holdings quite heavily in select areas.
The fund has a solid long-term record, besting Value Line’s European objective group over the trailing one-, three-, five-, and ten-year periods through the end of September. This performance led to an Overall Rank that was better than the average European fund under Value Line’s review. That said, the fund also received a Risk rank that was worse than the average European fund, underscoring the fact that the fund is about 20% more volatile (based on standard deviation) than other funds focused on Europe. Fidelity Nordic Fund’s concentration on just a handful of roughly similar countries, however, clearly adds to its risk profile in comparison to more broadly invested offerings.
With a $2,500 minimum investment and a reasonable expense ratio that is generally lower than the average European fund, Fidelity Nordic Fund is an interesting option for investors seeking European exposure—particularly if there is a desire to invest in just the Nordic region, or if broader commodity exposure is thought desirable.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.