Van Eck, the New York City-based issuer known for its hard assets funds, is planning an ETF that would allow investors to establish exposure to a handful of economies that boast considerable resource wealth. In a recent filing with the SEC, Van Eck outlined plans for an Andean ETF targeting the equity markets of Chile, Peru, and Colombia. This proposed ETF would offer another option for South America exposure beyond Brazil, the BRIC member that is by far the region’s largest economy. Many of Brazil’s neighbors have stolen the show this year, posting huge gains on the back of a broad rally in commodity markets.
The proposed fund from Van Eck would seek to replicate the Market Vectors Andean Index, a benchmark comprised of securities of companies located in Columbia, Peru, and Chile or that it generate at least 50% of revenues in Andean countries. As such, the underlying index could include companies listed in other South American countries–such as Brazil–that do a substantial portion of their business in South America’s west coast nations [also see Seven Factors Every Investor Needs To Know About Emerging Market ETF Investing].
As of December 1, 2010, the index included 55 securities of companies with a market capitalization range of between approximately $450 million and $89 billion and an average market capitalization of $7.5 billion. So the fund would have a tilt towards small caps, making it an alternative to many of the existing products in the Latin America Equities ETFdb Category that focus on giant cap banking and oil firms [also read Emerging Market ETFs: Where's The Consumer Exposure?].
Currently, country-specific ETFs offering exposure to the markets that would be covered by the Andean ETF are available, including ECH (Chile), EPU (Peru), and Colombia (GXG). In addition, Global X recently announced plans to develop a FTSE Andean 30 ETF that will target the 30 largest companies in the region [see Global X Planning Four New ETFs].
No expense information was revealed for the proposed Van Eck fund; the average expense ratio for the Latin America Equities ETFdb Category is 0.67%.
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Disclosure: No positions at time of writing.