Latin America ETFs: Comparing ILF and GML
September 14th, 2010 at 6:00am by Tom Lydon
Exchange traded fund (ETF) investors may have noticed that some areas of the markets are covered by multiple ETF products. Though the funds may be similar, fund providers offer different styles in managing their ETF products. Let’s take a closer look at two Latin America ETFs.
The International Monetary Fund (IMF) recently stated that Latin America’s economy could expand a higher-than-expected 5% for the year. Brazilian economists are even more bullish, predicting that Brazil’s economy will grow 7.2% this year. [Brazil ETFs Lead the Latin American Economy.]
The Brazilian Central Bank President Henrique Meirelles expects that the economy will continue to accelerate in the third quarter despite recent slowdowns. [Latin America ETFs: It’s Not All About Brazil.]
If you’re having trouble choosing a single-country ETF to access Latin America’s fast-growing economies, consider one of the two major Latin America ETFs. Let’s compare:
iShares S&P Latin America 40 Index (NYSEArca: ILF). ILF is the largest of the two ETFs, with $2.6 billion in assets. The ETF tries to reflect the performance of companies in the Mexican and South American equity markets in the S&P’s Latin America 40 Index. The fund has 34 holdings and has an expense ratio of 0.50%.
- Top holdings include: Vale Sa ADR at 12.22%, Banco Itau Holding 11% and America Movil SAB 9.8%.
- Top sector allocations: Materials 26.6%, Financials 23.7%, Consumer Staples 11.8%, Telecommunications Services 11.6% and Energy 11.5%.
- Top country allocations: Brazil 58%, Mexico 22.6% and Chile 13.3%.
SPDR S&P Emerging Latin America (NYSEArca: GML). GML has $197 million in assets and tries to reflect the performance of the S&P Latin America BMI Index. The fund has 102 holdings and has an expense ratio of 0.60%.
- Top holdings include: Vale S.A. 5.9%, Petrol Brasileiros 5.8% and Itau Unibanco HOld 4.9%.
- Top sector allocations: Materials 26.7%, Financials 18.9%, Consumer Staples 14.1%, Energy 13.01% and Telecommunications Services 9.00%.
- Country allocations: Brazil 65.9%, Mexico 18.9%, Chile 10.8% and Peru 4.4%.
Both funds are heavily weighted in materials, which is one of resource-rich Latin America’s most important sectors. Both funds are also nearly entirely composed of large-cap, international corporations.
To choose, consider how much exposure you’d like to Brazil (GML is slightly more heavily weighted) and how comfortable you are with exposure to financials – ILF has 23.7% vs. GML’s 18.9%. [Emerging Market Bank ETFs Emerge Stronger.]
For more information on Latin America, visit our Latin America category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.