Investing in the world’s happiest countries

By Sam Slator on 12 April 2023 in Multi-Asset

I don’t know about you, but I could do with a bit of good news for a change! Gloomy weather, soaring inflation, the war in Ukraine and regular reports from the IMF telling us “The world economy is entering a perilous phase” all seem to be conspiring to make life a bit miserable.

So, it was with welcome relief that I read the 2023 World Happiness Report recently. It’s a colourful report – full of smiling people – that reveals the countries where everything appears more cheerful and positive.

It ranks nations on factors such as GDP per capita, social support, healthy life expectancy, freedom to make choices, generosity, and perception of corruption. And, for the sixth year in a row, Finland was named the world’s happiest place, topping the table of 137 countries.

Europe as a whole made a very strong showing: Denmark was in second place, Iceland third, The Netherlands fifth, Sweden sixth, Norway seventh, Switzerland eighth and Luxembourg ninth. Israel and New Zealand made up the rest of the top 10. Perhaps unsurprisingly, war-torn Afghanistan and Lebanon emerged as the two unhappiest in the survey.

Can money buy you happiness?

Money, we are told, can’t buy you happiness, but have these countries’ stock market returns made investors smile?

Looking back over the same three-year period of the survey, 2020 to 2023, in sterling terms, the best-performing stock market of the top ten was Denmark, which was up more than 79%*.

The Netherlands, which saw gains in excess of 26% was second, while Norway as third with a rise just shy of 23%*. In fact, all the European countries in the top ten beat the average return of the wider MSCI Europe ex UK index, which was up just under 16%*.

The worst performing ‘happy’ country was New Zealand, which posted losses of almost 5.5%*.

Funds investing in the world’s happiest places**

While the Icelandic stock market is very small – there are just 20 listed companies in the Nasdaq Iceland index – the rest of the world’s happiest countries offer a range of opportunities: opportunities a number of our Elite Rated managers are taking advantage of.

Janus Henderson European Selected Opportunities, for example, has 12% invested in Dutch companies, 7% in Swiss firms, 6% in Danish-listed enterprises and 4% each in Swedish and Finnish firms including one of its largest positions, UPM Kymmene, a Finnish forest industry company that makes products made of responsibly sourced, renewable raw materials**.

Sweden and the Netherlands also have significant weightings in the FTF Martin Currie European Unconstrained fund, while Assa Abloy, a Swedish manufacturer of locks, doors, gates, and entrance automation, is currently a top ten holding**.

LF Montanaro European Income favours stocks in Norway and has a 12% weighting to companies listed there, including its second largest holding, Kitron**.

The largest stock holding in BlackRock European Dynamic is in Novo Nordisk, the Danish pharmaceutical company whose focus is on defeating diabetes** while U-Blox Holding, the Swiss wireless semi-conductor manufacturer is the biggest holdings for IFSL Marlborough European Special Situations***.

Luxembourg is a small country, but Aberdeen Standard SICAV I Global Mid Cap Equity fund has a 4.45% weighting to its companies****. Baillie Gifford Strategic Bond also has a 4.3% weighting to bonds of companies listed in the country****, while M&G Global Macro Bond has a very small 0.23% holding in an Icelandic bond****.

Outside of Europe, Invesco Global Focus fund has a 3% weighting to Israel** and Stewart Investors Asia Pacific Leaders Sustainability has a 2.2% exposure to New Zealand**.

*Source: FE fundinfo, total returns I sterling, MSCI indices, 1 January 2020 to 31 December 2022
**Source: fund factsheet, 28 February 2023
***Source: fund factsheet, 31 January 2023
****Source: FE fundinfo, area weighting, 11 April 2023

_{Photo by Lidya Nada on Unsplash}