Investing In The South American Frontier With The Global X FTSE Andean 40 ETF

Apr.15.12 | About: Global X (AND)

By Sam Hopkins

Now I admit that my plains upbringing may change my perspective, but I still can't figure out how so many investors are missing an opportunity the size of a mountain range. I'm talking about the Global X FTSE Andean 40 ETF (NYSE: AND). It's one of the most promising and least appreciated exchange-traded funds out there.

It's a great option for investors who want a path to South American emerging markets without putting half of their money in the Brazilian side of the continent. And this is a trend I think we're going to see a lot more of.

What's happening reminds me of the Asia and Pacific ETFs and mutual funds that add "ex-Japan" on the end. That doesn't mean the managers of funds like the WisdomTree Asia-Pacific ex-Japan ETF (NYSE: AXJL) had a nasty breakup with the Land of the Rising Sun. It means the stock pickers in charge know that Japan is a giant! Allocating money there could dampen returns from fast-moving companies in Asia's emerging markets. These days, funds are going "ex-Brazil," too.

The FTSE Andean 40 Index follows just three countries along the Andes mountain range. The same way the Andes gave us so many iconic images of the continent, the three countries in the Andean ETF highlight the most splendid parts of the South American economy.

  • Chile rules the Andean ETF with just over half of the fund's investment going to the Pacific Rim power.
  • Touching the Amazon, the Andes, the Pacific and the Caribbean, Colombia is second in strength at 29.00%.
  • Peru is last in weight, but definitely not in its potential to drive this fund's returns. A total of 19.90% of the Andean 40 pie is devoted to Peru, and its Peruvian holdings are rock solid.

Now, let's take a look at some of the stocks coming from each country.

AND holds Banco Santander Chile (NYSE: STD) and industrial company Sociedad Quimica y Minera (NYSE: SQM). For an interesting twist, it also gives you global wine giant Vina Concha y Toro (NYSE: VCO). Chile's diverse climate and copper production make it a key driver of growth for this ETF.

Colombia used to mean drugs and violence. Now two of its companies are up on the New York big board: national oil company Ecopetrol (NYSE: EC) and bank Bancolombia (NYSE: CIB) represent the country well.

From Peru, Southern Copper Corp. (NYSE: SCCO) and Compania de Minas Buenaventura (NYSE: BVN) highlight Peru's deposits of copper, gold, iron ore, lead, zinc, tin and molybdenum, which is a key component to iPods and many clean energy devices.

Now, don't think just living in the shadow of the mountains means a country or company is cut out for Andean 40 ETF- this fund keeps you out of Ecuador and Bolivia, both Andean nations with troubled economies. By focusing on the top economies and giving you separation from Brazil-centered funds, AND is building a profile you can't help but notice.

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