Senior Brazilian Fund Returns over 63% for the Year

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Continuing our series on single-country exchange-traded funds (ETFs), today’s fund, iShares MSCI Brazil Capped ETF (EWZ), exclusively concentrates on Brazil, the largest country in South America.

With $3.899 billion in net assets, EWZ is one of the powerhouse ETFs in the segment, easily dwarfing its peers in size. Though incorporated in the United States, the fund typically invests more than 95% of its assets in Brazilian companies.

EWZ grants investors exposure to 85% of the Brazilian equities market, using a standard market-cap-weighted strategy that approximates the entire market-cap spectrum, with an inclination towards mid- and large-cap firms. The smaller-cap companies are comprehensively covered by EWZ’s sister fund, iShares MSCI Brazil Small Cap Index ETF (EWZS). When coupled, the two funds provide a full representation of the entire Brazilian market.

Since its inception in July 2000, EWZ has had an overall return of 6.17% over its long track record. As you can see in the graph below, Brazilian stocks experienced a sharp upturn this year. However, after Trump’s surprising presidential victory in November, the fund suffered a downturn resulting from a large-scale sell-off that affected nearly all emerging market ETFs. Trump’s tough talk on trade with foreign powers during his campaign has driven fear into the hearts of many investors. But in just the past few days we can see a stabilization in EWZ’s price as investors have perhaps regained their composure on this issue.

The fund has a dividend yield of 1.59% and an expense ratio of 0.62%, which is relatively cheap among its peers. The fund is highly liquid and has massive trading volume on a day-to-day basis. Possibly in part due to the Rio Olympics, EWZ has a whopping year to date return of 63.93%! The S&P 500’s year to date return is 7.78%.

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View the current price, volume, performance and top 10 holdings of EWZ at ETFU.com.

The fund’s top five holdings are Itau Unibanco Holding SA, 11.63%; Bank Bradesco SA Pref Shs, 8.05%; Ambev SA, 8%; Petroleo Brasileiro SA Petrobras 5.47%; and Petrobras, 4.6%.

EWZ is an open-ended fund, meaning investors can get into it with relative ease, since there is no restriction on the total number of shares issued by the fund. Purchasing shares of the fund will simply create new shares. If you see Brazil as a rising powerhouse in its region, I encourage you to research iShares MSCI Brazil Capped ETF (EWZ) as a possible addition to your portfolio.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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