While the emerging markets have been rebounding this year, a small Latin America-focused exchange traded fund has been outperforming under the radar.
The Tierra XP Latin America Real Estate ETF (NYSEArca: LARE), which has $4.7 million in assets under management, has increased 29.8% year-to-date. Furthermore, LARE has come with an attractive 8.26% 12-month yield. In contrast, the iShares Latin America 40 ETF (NYSEArca: ILF), which takes the 40 largest Latin American companies, gained 23.5% so far this year and only offers a 1.81% yield.
Supporting the gains in LARE, improving fundamentals have helped bolster Latin America’s real estate investment trusts.
“Latin American real estate is in expansion mode due to favorable demographics, low valuations and expanding local capital markets – essentially the opposite scenario versus US REITs,” Jamie Anderson of Tierra Funds said in a note.
While there is definitely more risk in emerging market assets, potential investors have the opportunity to generate a much higher dividend yield to cushion short-term volatility typically associated with emerging economies. For instance, Brazil REITs pay 8% to 12% and Mexican REITs pay 7% to 9%.