New York-based asset manager Van Eck Global has launched the Market Vectors Latin America Small-Cap Index ETF, the first US-listed open-end exchange-traded fund which gives investors exposure to small-cap stocks in Latin America by seeking to track the Market Vectors Latin America Small-Cap Index.
“We believe that small-cap stocks are an excellent way to gain direct exposure to the domestic economy of a country,” says Jan van Eck, principal at Van Eck Global. “These companies operate largely or exclusively in their home markets and are positioned to take advantage of local economic trends such as growing household wealth and increasing consumer spending. LATM gives investors exposure to one of the world’s most economically dynamic regions.”
Latin America’s gross domestic product has grown at an average of 4.6 percent annually since 2005 and is expected to continue expanding at a rate in excess of that of the G-7 industrialized nations, according to the International Monetary Fund.
Additionally, Latin America small-cap stocks are supported by a fast-growing middle class and rising domestic consumption.
The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Latin America Small-Cap Index, which uses a float-adjusted modified market capitalisation weighting methodology.
Van Eck believes that the country weightings in the underlying index more closely reflect the percentage contribution each country makes to regional GDP than competing indices for the region.
Including offshore components, seven countries are currently represented in the index, with Brazil having the largest weighting, followed by Mexico, Chile, Peru, Colombia, Argentina and Ecuador. Offshore companies are eligible for inclusion in the index, provided that they generate at least 50 per cent of their revenues in Latin America.
The top three industry weightings in the index are materials (26 per cent), consumer discretionary (23 per cent) and industrials (14 per cent).
The fund’s net expense ratio is 0.63 per cent and its gross expense ratio is 0.68 per cent.