iShares has launched the iShares MSCI Argentina and Global Exposure ETF (Bats: AGT). The ETF is designed to provide exposure to Argentinian equities, as well as foreign-listed companies with significant exposure to the Latin American country.
The iShares product will become the second US-listed ETF to track Argentina equity after the Global-X MSCI Argentina ETF.
AGT tracks the performance of the MSCI All Argentina 25/50 Index, which is designed to represent the performance of the broad Argentina equity universe, consisting of companies that are headquartered in or listed in Argentina, or have a large economic exposure to Argentina.
The methodology incorporates the investment limits required of regulated investment companies (RICs) in the US, namely that at each quarterly rebalance no single constituent can comprise more than 25% and the sum of the weights of all constituents greater than 5% must not exceed 50%.
The largest sector exposures within the fund are energy (30%), information technology (21%) and financials (14%). The ETF does contain significant stock-specific risk, with the two largest individual constituents, e-commerce firm Mercadolibre and pipe supplier Tenaris, each having an 18% allocation. Petroleum-refining company YPF also accounts for 9% of the fund’s holdings. (Data as of 2 May 2017)
The index has returned 12% per annum over the five years to 31 March 2017, compared to 5.8% for the MSCI Frontier Markets Index and 8.4% for the MSCI ACWI Index. Volatility is considerably higher, however, at 24% per annum over the same time period, compared to 12% for MSCI Frontier Markets and 11% for MSCI ACWI.
The ETF is physically replicated and has a total expense ratio of 0.59%.
Since the election of President Mauricio Macri in late 2015, Argentina has been taking steps to rebuild its economy. The removal of capital controls and allowing the currency to float freely have helped restore investor confidence and contributed to the eye-catching 48% return seen by the MSCI All Argentina 25/50 Index in the year to 31 March 2017.
In June, MSCI will announce whether Argentina is to be promoted from a frontier market to an emerging market, a categorization it has held since it imposed capital controls on “hot money” in 2009, in a move that experts think could cause as much as $1bn to flow into Argentina equities.
AGT is the second Argentina equity ETF to be listed in the US, following from the Global-X MSCI Argentina ETF (NYSE Acra: ARGT) which was launched in 2011. ARGT currently also has an expense ratio of 0.59% due to a fee waiver of 0.15% in place until at least 1 May 2018. The ETF tracks the same index as the new iShares product and has AUM of $134 million.