State Street Global Advisors (SSgA), the fund provider behind
the SPDR ETFs, filed paperwork with the Securities and Exchange
Commission to bring to market an ETF that tracks an index based on
publicly traded companies in Latin America. It will be SSgAâs
second fund focused on the region.
The SPDR S'P MILA 40 ETF is entering a regional niche occupied
by only a few funds such as the segment leader, the $1.7 billion
iShares S'P Latin America 40 Index Fund (NYSEArca:ILF) and SSgAâs
own $115 million SPDR S'P Emerging Latin America ETF
(NYSEArca:GML), which has 107 holdings. Apart from size of the
portfolio, itâs not immediately clear how SSgAâs new fund
differs from GML.
Latin America has become increasingly popular among investors in
the past 10 years. A huge part of that story is the ongoing rise of
Brazil, which is one of the worldâs biggest agricultural
producers and is quickly turning into a big oil producer as well.
Also, countries like Chile that produce copper for China and
companies like Mexico-based cellular firm America Movil are part of
The new fund will use a sampling strategy to track an index
comprising the largest and most liquid stocks trading on the
Mercado Integrado Latinoamericano (MILA) platform, an integrated
trading venture formed by various Latin American exchanges.
The fundâs underlying index itself consists of the largest 40
eligible stocks based on float-adjusted market capitalization that
must be above $100 million as of the rebalancing date. Further, to
ensure liquidity, constituent stocks must have a three-month
average daily value traded in their local markets of above $250,000
as of the ârebalancing reference date,â the filing said.
According to the filing, the principal risks of investing in the
MILA 40 ETF are typical of investments in emerging markets and
include greater market volatility, high levels of inflation,
deflation and/or currency deflation than those typically found in
Latin American countries in particular are typically
characterized by high unemployment, inflation and high interest
rates. Further, because a relatively small portion of companies
represent such a large percentage of the Latin American market,
they may be more vulnerable to adverse economic circumstances and
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