iShares, the world's largest ETF provider, today rolled out an
equity exchange-traded fund focused on Colombian companies, making
it the third-and cheapest-ETF targeting the South American
The iShares MSCI Colombia Capped ETF (NYSEArca:ICOL), tracking
the MSCI All Colombia Capped Index, will invest in some 25 local
companies and have an annual expense ratio of 0.61 percent-or $61
per $10,000 invested, according to the fund's prospectus.
ICOL is the third U.S.-listed ETF to focus on Colombian
companies, but it's coming to market with the lowest expense ratio
in the segment. The four-year-old Global X FTSE Colombia 20
(NYSEArca:GXG) and the two year-old Market Vectors Colombia ETF
(NYSEArca:COLX) cost 0.79 percent and 0.75 percent,
That price difference could be meaningful in the battle for
investor assets, though it's worth noting that the $150 million GXG
controls nearly 98 percent of all assets in the space despite its
having a higher expense ratio, thanks in part to good liquidity
that competing Van Eck' COLX doesn't have. COLX has under $3
million in assets.
What's also interesting is that these Colombia-focused
, while similar on the surface, have delivered somewhat different
results over time.
Both GXG and COLX are known for their heavy portfolio
concentration-where roughly three-quarters of each fund's assets is
linked to the top 10 holdings-but GXG has slipped some 6 percent in
the past year and is now trading at 18-month lows, while COLX has
declined 3.7 percent in the same period, according to IndexUniverse
iShares is attempting to steer clear of that lack of
diversification by imposing a 25 percent cap on single-company
exposure. The strategy also stipulates that companies with a weight
of more than 5 percent cannot total, in the aggregate, more than 50
percent of overall portfolio.
These measures are intended to provide investors with a more
diversified exposure to Colombian equities, even if the portfolio
consists of only 25 names. GXG, by comparison, invests in 20
securities, while COLX owns 22.
Energy, financials and utilities will be some of the primary
sector allocations in ICOL at launch. In comparison, GXG owns more
utilities and consumer cyclicals than COLX, which is heavier in
basic materials than GXG with a 16 percent allocation to the
Both funds have financials as their largest sector
allocation-between 35 and 40 percent of the portfolio-followed by
energy, at roughly a quarter of the mix.
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