How does it fit in a portfolio?
PGAL could be an interesting pick for investors who believe that the European debt story has seen its worst days, and that better trading is still ahead. If this is your viewpoint, then a look to a Portugal ETF seems like a solid pick, as it could have more upside than the larger PIIGS markets like Spain and Italy which always seem to have better bailout prospects anyway (see Why the PIIGS ETFs Are Outperforming).
This fund may not be appropriate for investors who are worried about Europe growing out of its debt issues, or for those who think that the EU will need to make an example out of some of the smaller markets. Furthermore, the country is still battling through austerity measures, so growth could be difficult to come by in the near term.
ETF Competition and Bottom Line
This represents the first time that U.S. investors have a product that exclusively focuses in on the Portuguese market in ETF form. As such, there are really no direct competitors for this product, though this does complete the PIIGS ETF list, as the other four nations in the group—Ireland (EIRL), Italy (EWI), Greece (GREK), and Spain (EWP)—already had ETFs of their own.
The group has seen very mixed success in terms of attracting assets, as EWI and EWP have, respectively, $850 million and $790 million in AUM, while GREK and EIRL have seen just a fraction of that, though both are likely profitable for their issuers. EIRL has actually cracked the $100 million under management mark, while GREK is right behind, possessing over $90 million.
This is a pretty solid level of interest all around, and especially so for Ireland and Greece, as both of these ETFs also target small countries and have less than 30 securities in their baskets, much like the new Portugal fund.
Given this, the new Portugal ETF might be able to attract a decent following, though it will definitely require a stable Europe and successful navigation through austerity for this product to outperform some of its peers in the region.
This article is brought to you courtesy of Eric Dutram.