iShares launches Colombia ETF

Jun 21st, 2013 | By | Category: Equities

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iShares, the world’s largest manager of exchange-traded funds (ETFs), has launched the iShares MSCI Colombia Capped ETF (ICOL), a new fund providing targeted exposure to the Colombian equity market.

iShares launches Colombia ETF

The iShares MSCI Colombia Capped ETF (ICOL) has been listed on the NYSE Arca.

The fund, listed on the NYSE Arca, tracks the MSCI All Colombia Capped Index, a broad-market index measuring the performance of companies that are headquartered or listed in Colombia and have the majority of their operations based there.

The ‘capped’ element of the index ensures that no single constituent exceeds a weight of 25% and that the combined weight of those constituents with a weight above 5% does not exceed 50%. The index includes an optimisation function to calculate the capped index weights so as to minimise index turnover, tracking error and extreme deviation from the uncapped index.

The new fund complements iShares’ existing Latin American line-up, which includes a range of products offering exposure to Brazil, Mexico, Chile, Peru and the region as a whole.

In recent years there has progressively been more interest in Colombia, with investors attracted to its 47 million population (the third largest among Latin and South American countries), a growing educated and entrepreneurial middle class, and a higher realised GDP growth than Brazil due to demand for its oil, natural gas and coal.

The country’s strong fiscal management, gradually declining debt, positive trading ties and business-friendly economic policies focused on deregulation have also appealed, in turn leading to a steady uptrend in foreign investment.

Patrick Dunne, Head of iShares Global Markets and Investments at BlackRock, the parent of iShares, said: “Colombia has been referred to as the ‘new Brazil.’ Institutional and retail investors now have an efficient means to access one of the world’s most exciting economies, whether implementing a short-term tactical strategy or building a long-term diversified global portfolio.”

The sectors with the largest weightings are financials (34.0%), energy (33.6%), utilities (15.4%), materials (8.8%) and consumer staples (8.7%). Major constituents include Ecopetrol, Pacific Rubiales Energy, Bancolombia, Rupo De Inv Suramericana and Corp Financiera Colombiana (as of June 19, 2013).

With an expense ratio of 0.69%, the fund is priced favourably compared to its nearest rivals, which include the Market Vectors Colombia ETF (COLX) at 0.75% and the Global X FTSE Columbia 20 ETF (GXG) at 0.79%. The Global X Fund product (GXG) has assets of $141 million.

As yet, there is no dedicated Colombian equity ETF listed on a European exchange. UK and European investors seeking exposure to the country have to make do with products linked to the MSCI EM Latin America Index, which has around 5% allocated to Colombia. In addition to iShares’ European business, the providers offering access to this index include SSgA SPDR, db X-trackers, Amundi, HSBC and Lyxor.

Full iShares Latin America line-up:

iShares MSCI Emerging Markets Latin America ETF (EEML)
iShares Latin America 40 Index ETF (ILF)
iShares MSCI Brazil Capped ETF (EWZ)
iShares MSCI Brazil Small-Cap ETF (EWZS)
iShares MSCI Chile Capped ETF (ECH)
iShares MSCI Colombia Capped ETF (ICOL),
iShares MSCI Mexico Capped ETF (EWW)
iShares MSCI Peru Capped ETF (EPU)

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