Viva Colombia: A Look Under the Hood of COLX

Includes: COLX, EC, GXG
by: Benzinga

By The ETF Professor

These are exciting times for Colombia. The South American nation once ravaged by militant rebel attacks and more known for kidnappings and exports of nefarious fare has become a legitimate player on South America's economic stage.

While not an OPEC member, Colombia's oil production is soaring. The country, South America's third-largest oil producer behind Brazil and Venezuela, pumped a record 884,000 barrels of crude last month and is hoping to almost double that total by 2020.

Plus, the country's credit rating was recently upgraded, so now seems like a good time to go under the hood with the newly minted Market Vectors Colombia ETF (NYSEARCA:COLX).

The introduction of COLX could be viewed as risky gambit by Van Eck, the parent company of Market Vectors. After all, Global X has had the Colombia-specific ETF market cornered for more than two years with the widly popular Global X/InterBolsa FTSE Colombia 20 ETF (NYSEARCA:GXG).

Perhaps one result of the ETF industry's exponential growth is that issuers think there is room for me-too funds and they do think this because this is a practice that has been employed for several years now. In other words, COLX isn't blazing trails here, it's following precedent.

Still, COLX obviously has its work cut out for it in challenging GXG in terms of assets under management as GXG has almost $138 million in AUM. That task may be made harder by the fact that COLX has fees of 0.75% while GXG's expense ratio is 0.68%.

On the other hand, COLX deserves a nod for tracking 28 stocks, none of which get a weighting of more than 8.35%. By comparison, GXG tracks just 21 stocks and Ecopetrol (NYSE:EC), Colombia's state-run oil producer, accounts for almost 16% of that ETF's weight.

Another point in COLX's favor is weighting of more than 17% to the materials sector, which is critical because Colombia is more than oil. It is rich in many other natural resources that need to be mined and this factor alone makes COLX interesting.

No, one doesn't need to own both of these ETFs at the same time, but Colombia's growth outlook is such that two ETFs for this rapidly growing emerging market isn't such a far-flung idea. This is just speculation, but if COLX could undercut GXG on fees, we might have a new emerging markets ETF rivalry on our hands.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.