It has been a long, often trying for road for investors in Latin American equities and exchange traded funds, but since emerging markets ETFs put in what appears to be a legitimate bottom earlier this year, some LatAm funds have delivered.
The iShares Latin American 40 ETF (NYSEArca: ILF) is one of those ETFs. Off its Feb. 3 bottom, ILF has surged 25.3%, a performance that is an average of 650 basis points better than the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) and the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) over the same period. [LatAm ETFs on the Rise Again]
IFL “is picking up in and its chart is acting great now, too,” according to Captain John Charts. “It’s breaking out of resistance of a longer term down trend line.”
Brazil has been the main driver of ILF’s recent bullishness. As is the case with most multi-country LatAm ETFs, ILF is heavily allocated to Brazil. The region’s largest economy accounts for 55.5% of ETF’s weight, double the weight allocated to Mexico.
Chile checks in at almost 10% while Peru and Colombia combine for just 10%, diminishing ILF’s exposure to recent bullishness in Colombian and Peruvian equities. [Peru ETF Surprises in a Good Way]
Although investors have poured money into the comparable Mexico ETF this year, the iShares MSCI Brazil Capped ETF (NYSEArca: EWZ) is up 15.1% and is flirting with its first close above $50 since October 2013. [LatAm ETFs Look for Some Love]
As is the case with EWZ, ILF is also within pennies of its October 2013 highs, an area that some technical analysts have pointed to as representing a breakout area for ILF.
ILF’s primary rivals are the SPDR S&P Emerging Latin America ETF (NYSEArca: GML) and the First Trust Latin America AlphaDEX Fund (NYSE: FLN). GML and FLN are smaller than ILF in terms of assets, but both hold more stocks and have outpaced ILF over the past three months.
While investors have been somewhat shy about devoting new capital to EWZ this year, ILF has pulled almost $149 million in new assets, or about 13% of its current assets under management tally.
iShares Latin American 40 ETF
Chart Courtesy: Captain John Charts
Tom Lydon’s clients own shares of EEM and ILF.