Ireland

Over the weekend CBS Marketwatch had an article about investing in Ireland and what is going on in the Irish pro-business economy. I first read about Ireland as an investment theme about ten years ago in what is now the Bloomberg Markets magazine. Since that article the ISEQ has tripled, surviving a 33% hit when the US markets declined post bubble.

The pro-business part of the story has been roughly the same all these years. The Irish government is openly trying to lure business by offering 12.5% tax rate, the lowest in Western Europe, and a 20% tax credit for research and development. You can read the article for more details.

I have been on board with Ireland for a while, my clients and I own one of the Irish banks (some disclosure for those of you that like that sort of thing). There are not too many ways to invest in Ireland currently. There is no Irish iShare, nor could I find any index fund available to US investors. iShares does have a United Kingdom Fund (EWU), but it captures very little of Ireland. In just about every time period you can find Ireland has outperformed the UK which reiterates EWU as a poor proxy.

There is one closed end fund called the New Irish Fund (IRL). According to ADR.com there are 17 Irish companies that trade as ADRs but only three of them trade on the NYSE.

The New Irish fund trades at a 12.5% discount an offers a very small dividend but over the last 12 months it has returned more than 40% while the ISEQ index has returned about 25%. Over time the ISEQ has offered a low correlation to the US markets. In the last five years Ireland has outperformed the S+P 500 dramatically.

While I expect the US to continue to move higher I think it is more about momentum and managers playing catch up. Longer term I have real concerns about the US market. Ireland is small, 79 billion euros for the entire market, and doing what it takes to draw foreign companies in. The GDP(4.1%) is growing faster than most of Europe and unemployment(4.4%) is lower than most of Europe. Makes sense to me.

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