Van Eck Global has introduced the Market Vectors Brazil Small-Cap ETF (BRF), the first U.S.-listed exchange-traded fund (ETF) to focus on Brazilian small-cap stocks.
BRF and its underlying index (the Market Vectors Brazil Small-Cap Index, or MVRIO) are designed to give investors exposure to Brazilian investment themes and opportunities, such as the growth potential in Brazil’s homebuilding and consumer goods sectors. The underlying index holds 52 stocks with Ultrapar Participacoes, Eletropaulo Metropolitana, and Cyrela Brazil Realty as the top-three holdings.
The largest Brazil ETF traded in the U.S. is the iShares MSCI Brazil Index Fund (EWZ). Stocks within the fund have a median market capitalization size of $2.23 billion. EWZ has $3.3 billion in assets and charges an annual expense ratio of 0.63 percent.
Emerging-market stocks (EEM) have been one of the best performing equity segments so far in 2009.
“In our view, small-cap stocks represent excellent direct exposure to the Brazilian economy since small-caps are typically driven by local trends,” says Jan van Eck, Principal at Van Eck Global. “BRF is well diversified and avoids the heavy commodities and materials weightings of other Brazil-focused products currently on the market.”
“Energy and Materials accounted for more than 50 percent of the weighting in the typical Brazil-focused index as of April 30th of this year,” continues van Eck. “By way of comparison, Energy and Materials made up just 16 percent of MVRIO at that same time. We believe that this makes BRF a unique product and one that will appeal to investors who are looking for a different type of exposure to Brazil’s local economy.”
The top three industry weightings for BRF’s index are Household Durables, Food Products and Specialty Retail at 16 percent, 9 percent and 8 percent respectively.
BRF’s underlying index is calculated and maintained by Standard & Poor’s on behalf of 4asset-management GmbH. At the end of April, the index had a weighted average market cap of $1.4 billion.
According to the prospectus, BRF’s annual expense ratio is 0.73 percent.
BRF is the 20th ETF offered under Van Eck’s Market Vectors brand, which includes hard assets, international, specialty and municipal-bond ETFs. Currently, there’s around $7 billion invested in Market Vectors ETFs. At the end of April, Van Eck was the sixth largest provider of ETFs in the U.S.
Ron DeLegge is the San Diego-based publisher and editor of ETFguide.com is a frequent speaker and radio host on index investing. He also has been an investment and financial advisor and holds the Series 65 and 63 licenses.