Brazil's Stealthy ETF Studs
Being the big kahuna in a particular ETF niche certainly has its advantages. That notion is supported by the assets under management statistics for plenty of country-specific funds, even those that face ample competition.
Take China for instance. The iShares FTSE China 25 Index Fund (NYSE: FXI) has almost $6.9 billion in AUM, a number that is hardly threatened by most of the other 225 ETFs offering exposure to the world's fastest-growing major economy.
A similar situation is found with Brazil and the iShares MSCI Brazil Index Fund (NYSE: EWZ). EWZ has almost $10.9 billion in AUM, a number that far exceeds the AUM totals of most of the 118 other ETFs offering exposure to Latin America's largest economy.
Yes, the iShares MSCI Emerging Markets Index Fund (NYSE: EEM) and the Vanguard MSCI Emerging Markets ETF (NYSE: VWO) are much larger by assets than FXI or EWZ, but when it comes to rival China or Brazil funds, FXI and EWZ are the dominant names by wide margins.
In the case of EWZ, that doesn't mean it's the best Brazil ETF. After all, bigger isn't always better with ETFs. Yes, it must be acknowledged that at the start of trading today, EWZ was up 19% year-to-date. Along those lines, it must also be acknowledged EWZ's rising tide is lifting the sales of plenty of other Brazil-specific ETFs and some members of that club are actually outperforming EWZ to start the new year.
If EWZ isn't your cup of tea, try one of the following Brazil ETFs on for size.
Market Vectors Brazil Small Cap ETF (NYSE: BRF) BRF and its rival, the iShares MSCI Brazil Small Cap Index Fund (NYSE: EWZS), have both outperformed EWZ to start the year, but we'll give the nod to BRF because its up more than EWZS and is much larger in terms of AUM (as in more than 12 times bigger). EWZS does have the lower expense ratio, something that long-term investors should consider. Maybe the best thing is that since BRF and EWZS are small-cap plays, they can be paired with EWZ, which is heavy on large-caps, to double one's Brazilian pleasure.
Global X Brazil Financials ETF (NYSE: BRAF) At almost 24.4%, financials represent EWZ's largest sector allocation, so the ETF is a fine way of playing Brazilian banks. Or you can opt to play Brazilian banks straight away with the Global X Brazil Financials ETF, which is up more than 24% year-to-date. With emerging markets financials ETF looking strong to start 2012 BRAF is worth a look here and the yield of almost 5% isn't bad either.
Global X Brazil Consumer ETF (NYSE: BRAQ) Like its financials-focused counterpart, BRAQ is an unheralded Brazilian play. And like BRAF, BRAQ has also outpaced EWZ this year. BRAQ is pulling back a bit today, but it would be a bullish sign if the ETF can find support at $18. Brazil's strong domestic economy could mean BRAQ's bull run is still in the early innings.
EGShares Brazil Infrastructure ETF (NYSE: BRXX) The EGShares Brazil Infrastructure ETF has NOT outperformed EWZ year-to-date, but it trails its larger rival by just a small margin. BRXX holds no bank stocks and offers no exposure to Petrobras (NYSE: PBR), Brazil's state-run oil company, but there is some overlap among the holdings of these two ETFs (with different weightings we should add).
ETF Trends recently noted that BRXX has been buoyed by expectations of increased infrastructure spending in Brazil ahead of the 2014 World Cup and 2016 Summer Olympics. While that fundamental case for BRXX has been beaten like a dead horse since Brazil was named as the host for those prestigious sporting events, it remains accurate today. BRXX is a valid play on Brazil hosting the World Cup and the Olympics, but only if the government really does improve domestic infrastructure.
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