Exchange traded funds caught fire in 2013, passing $2.4 trillion in global AUM and giving investors great returns (much as you’d expect with surging equities), but even for investors who know not to use ETFs for market timing strategies, deciding which exchange you want to invest in is an important question.

Country selection strategy an important source of alpha

“Despite the limited breadth of negative performing countries, the overall spread of returns across countries was relatively wide, with the worst performer, Brazil at -4.6%, and Sweden at 3.9%. This suggests that country selection remains an important source of alpha for global investors,” says a recent Citi report from the banks global quantitative team led by Chris Montagu.

But past returns aren’t the only thing you should look at when deciding where to put your money. Citi’s market-ranking model runs a regression on most of the variables you’d expect: price momentum, value (PE, price-to-book, and price-to-cash flow), earnings revisions, dividend yields, changes in analyst estimate.

Japan Germany, and South Africa attractive

Based on this model, Japan, Germany, and South Africa are the most attractive stock markets to get involved in while Mexico is hands down the least attractive. Brazil’s rating dropped dramatically in December because of poor price momentum, putting it just behind Mexico. The fact that Sweden comes in as the fourth worst country to invest despite putting up solid positive returns, as Montagu notes, casts some doubt on the model, but the size of the spread still suggests that a country picking strategy could be profitable.

Make sure active ETFs match your investment strategy

One thing to watch out for is the growing popularity of active ETFs. In the best case scenario this could be a cheap way to get a professional involved in your portfolio, but many of these products are heavily invested in fixed income products, which are expected to have a rough year as interest rates go up. If you want to invest in an active ETF, make sure the mix of equities and bonds matches your investment strategy. Also, there’s evidence that ETFs perform better when you can mess with them as much. You’d hope a professional will have better results, but there is certainly no guarantee.