BlackRock lists German-domiciled MSCI Brazil ETF

Oct 29th, 2018 | By | Category: Equities

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BlackRock has launched the iShares MSCI Brazil UCITS ETF (4BRZ GY) on Xetra.

BlackRock lists MSCI Brazil ETF on Xetra

The MSCI Brazil Index has 54 constituents and covers approximately 85% of the Brazilian equity universe.

The fund tracks the MSCI Brazil Index, providing exposure to the large- and mid-cap equity markets of Brazil. The index contains 54 constituents and covers approximately 85% of the Brazilian equity universe.

Stocks are weighted by free float-adjusted market capitalization, and the index is reconstituted and rebalanced quarterly in February, May, August, and November.

The ETF is domiciled in Germany, trades in US dollars, and is offered with a total expense ratio (TER) of 0.48%.

Income is accumulated within the fund.

Interestingly, BlackRock already offers two ETFs, domiciled in Ireland, which track the same index and have the same names as the new fund.

They differ in their treatment of portfolio income with one accumulating it within the fund (TER – 0.65%) and the other distributing it (TER – 0.74%). Collectively, the two ETFs house around $440 million in assets under management.

BlackRock likely launched the new fund to cater to a specific client that requested a lower-cost means of obtaining Brazilian equity exposure. It will be interesting to see whether BlackRock will lower the costs of the two existing ETFs to bring them in line with their newest product.

Heightened market uncertainty

As of the end of September 2018, the MSCI Brazil Index is down 14.0% over the past year compared to just 0.8% for the MSCI Emerging Markets Index. Its troublesome performance reflects the country’s recent political and economic struggles as it tried to deal with various corruption scandals.

The index’s volatility statistics are even more jarring – its annualized standard deviation is 34.1% compared to 14.3% for the MSCI EM Index.

However, the outlook for the country may be rosier than its recent performance.

Ahead of the first round of Presidential elections which took place on 7 October, Brazil’s equity market staged a rally, gaining 7.0% over September compared to a 0.5% drop for the broader EM universe. And with far-right Presidential candidate Jair Bolsonaro, who is considered pro-reform and market-friendly, today being declared the winner of a closely fought second round run-off vote, Brazil’s markets may continue to surprise to the upside.

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