ETF Trends
ETF Trends

Recently the theme in the options market concerning the largest Mexico equity fund in the U.S. listed landscape, EWW (iShares MSCI Mexico Capped, Expense Ratio 0.49%) has been “limited upside” judging from the call selling we have seen and tracked.

Year to date, EWW has seen more than $457 million leave the fund thanks to redemptions, and the fund is on a brutal losing streak coming into today’s trading, flirting with its lowest levels of the year. In spite of the recent outflows, the fund still has a notable $1.75 billion in assets under management, and the fund clearly has a mega to large cap bias in terms of its underlying index weightings.

Consumer Staples are well represented (24% of the portfolio), followed by both Financial Services (18%) and Telecom (18%), with top single stock holdings of America Movil SAB de CV Class L (>>17.3%), Fomento Economico Mexicano SAB de CV (>7.8%), and Grupo Televisa SAB (>7.6%).

Ordinary shares are held in this particular portfolio even though America Movil for example also trades in the U.S. under an ADR (ticker AMX). EWW has a commanding advantage in the “Mexico” equity space, likely due to its tenure on the market (debuted in 1996) as well as its listed options availability and liquidity.

Although we do not see substantial options activity in EWW say on a daily basis, there are from time to time block options trades that occur that look like hedges or outright directional bets of several thousand contracts at a time. EWW judging by assets under management is really the “only game in town” apparently in the minds of portfolio managers, as little attention is spent on the smaller funds in the category at least at the moment.

DBMX (Deutsche MSCI Mexico Hedged Equity, Expense Ratio 0.50%) debuted in January of last year and still has less than $5 million in assets under management, but we have spoken about the rising appetite for institutional positioning in “Currency Hedged Equity” products.

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