BlackRock’s iShares exchange-traded funds business has launched an ETF providing access to Columbia.
The iShares MSCI Colombia Capped ETF (ICOL) complements the iShares Latin and South American ETF line-up, which is the largest in terms of number of funds in the US.
“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,” says Patrick Dunne, head of iShares global markets and investments at BlackRock.
According to the IMF, Colombia has the third largest population among Latin and South American countries, with 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. According to the World Bank, there is an increasing amount of foreign investment in Colombia because of strong fiscal management, gradually declining debt, positive trading ties with the world and business-friendly economic policies focused on deregulation.
The iShares MSCI Colombia Capped ETF is designed to track the MSCI All Colombia Capped Index, which is a broad-based Colombia equity market index. The index includes companies that are headquartered or listed in Colombia and have the majority of their operations based in Colombia. The index applies certain investment constraints that are imposed on regulated investment companies, or RICs, under the current US Internal Revenue Code, where no single group entity can exceed 25 per cent of the index weight and all group entities with weights above five per cent cannot exceed 50 per cent of the index weight. The Barra Optimizer is used to calculate the capped index weights through an optimisation function which is aimed at minimising index turnover, tracking error and extreme deviation from the uncapped index.
As of 29 May 2013, the largest sector weightings of the index included financials (34.17 per cent), energy (31.58 per cent) and utilities (14.99 per cent).
