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Global X/InterBolsa FTSE Colombia 20 ETF (GXG) is the first ETF to focus on Colombia and the first offering from Global X Management Company. As the name implies, this ETF will consist of stocks from the 20 companies in the FTSE Colombia 20 Index.

Friday’s press release has a headline of “First Colombia ETF starts trading…” although no shares actually traded. The bid/ask spread was around 25 cents most of the day with a $15.44 bid and $15.69 ask near the close. The fact sheet contains little information - no holdings, no sector composition, no information on index capping methodology.

The prospectus includes additional funds covering Argentina, Egypt, Peru, and the Philippines. It also highlights specific risks of investing in Colombia, including:

  • An economy heavily dependent on exports of oil, coal, and coffee to key trading partners of U.S., Brazil, and Mexico.
  • Colombia has experienced high interest rates, economic volatility, inflation, currency devaluations, and high unemployment rates.
  • Colombia has experienced a high level of debt and public spending, which may stifle economic growth, contribute to prolonged periods of recession, or lower the country’s sovereign debt rating.
  • Colombia has experienced periods of political instability, violence, and social unrest in the past.
  • Although levels of violence associated with internal conflicts and drug trafficking have fallen, they remain high by international standards.
  • In the recent past, Colombia has imposed stringent capital controls that have restricted the inflow and repatriation of capital and the free transfers of securities. These controls have since been eased but there can be no assurance that they will not be reinstated or changed again and without warning.
  • These capital controls could disrupt the creation/redemption process thereby adversely affecting trading of the Fund’s shares.

This one could be a tough sell: first ETF from a new ETF sponsor focusing on a small but risky area of the global market.

Disclosure: no positions

Source: New Colombia ETF May Be a Tough Sell