iShares, the largest ETF issuer in the world, already has a
pretty diverse lineup of funds. The company has products
targeting a variety of asset classes, including domestic stocks,
bonds, and commodities.
The firm has an especially large lead in the foreign ETF
market, thanks to its numerous country-specific funds. In
particular, iShares' dominance is impressive in the Latin
American segment, thanks to a number of ultra-popular
for Brazil, and
for Mexico, two products that are both more than decade old, and
have more than $1 billion in AUM each. The company has also
branched off into other, smaller nations in the region, such as
, rounding out their Latin American offering (see
4 Best ETF Strategies for 2013
Now though, it appears as if iShares is once again expanding
its Latin America ETF lineup, with a brand new fund targeting
MSCI Colombia Capped ETF (ICOL)
. This product brings iShares' offering in the region up to eight
funds, while also helping to provide some competition in a
quickly growing market as well.
ICOL in Focus
The new ETF looks to follow the MSCI All Colombia Capped Index
in order to capture the performance of the large, mid, and small
cap segments of the broad Colombian market. In order to be
included in this benchmark, securities must be either based in
the nation, or need to have a majority of their operations in
Time to Buy This Top Ranked ETF?
Investors should also note that the 'capped' focus of the
index looks to avoid excessive concentration, preventing a single
firm from making up more than 25% of the benchmark. Additionally,
stocks that have weights above 5% in aggregate cannot make up
more than half of the portfolio.
Still, even with this cap, the index looks to have a bit of
concentration with Ecopetrol taking up over 17.5%, and Pacific
Rubiales Energy occupying another 9.6% as well. Financials then
dominate much of the rest of the top holdings, giving the
portfolio a tilt towards energy and financials which each account
for one-third of the assets, followed by utilities (15%).
In total, two dozen companies find their way into the product,
suggesting that it isn't the deepest national market out there.
That is probably also why expenses are somewhat elevated, coming
in at 61 basis points a year.
A reason for this launch is probably due to the rise of
Colombia as an investing hotspot. The country has managed to get
drugs and security issues somewhat under control, while the
economy has also been booming as well (see
Latin America ETFs: Beyond Brazil
The nation is a big commodity producer of key products like
oil, while it also has decent sized operations in the industrial
metal market, not to mention its famous coffee as well. Thanks to
a recent commodity boom and a better security atmosphere, the
nation is now growing more than 4% a year on the GDP front, while
debt-to-GDP remains at a low level.
For these reasons, the Colombian market has really taken off
lately, providing long term investors with solid gains. The
country is now rivaling others in the region as an investment
destination, and thus could be a good pick for some emerging
market investors who have a high risk tolerance.
Unfortunately for iShares though, a couple other ETF providers
have already caught on to the Colombian growth story and have
launched funds of their own in the space. This includes the
Market Vectors Colombia ETF (
and the older
Global X FTSE Colombia 20 ETF (
Despite a strong level of performance (130% gain since
inception for GXG), the two haven't really seen big inflows. In
fact, the total invested between the two is below $150 million,
with the vast majority going to GXG (read
Colombia ETFs: Head-to-Head
Given this low level of interest so far in what was until the
recent emerging market slump a great story, it is hard to say how
ICOL will perform. iShares does have a pretty good track record
in countries, even when it isn't the first mover (see
So the company could have a modest winner on its hands in
Colombia, assuming that the bottom doesn't fall out for emerging
markets in the aftermath of tapering talk and a strong dollar.
Still, investors seem to be somewhat skittish about Colombia ETF
investing-possibly due to its concentration issues-so this new
iShares fund is by no means a sure thing in terms of asset
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MKT VEC-COLUMB (COLX): ETF Research Reports
GLBL-X/F COL 20 (GXG): ETF Research Reports
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