In the first five months of 2009, the Latin American exchange traded funds (ETFs) industry had 11 locally domiciled ETFs, 174 exchange listings and assets of $7.47 billion from two providers on two exchanges. Year to date (YTD) assets have increased by 45.8%, which is less than the 46.5% rise in the MSCI EM Latin America Index in US dollar terms.

According to the latest report* on the Latin American ETF environment from BarclaysGlobal Investors, the number of ETFs YTD increased by 10% with one new ETF launched. YTD the average daily trading volume increased by 34.1% to $172.8 million.

iShares, recently acquired by BlackRock in a deal expected to be completed in the first quarter of 2010, was the largest ETF provider in terms of assets with $6.29 billion under management in 10 ETFs. This accounted for an 84.2% market share in the Latin American market.

Banco Itau was second largest provider with $1.2 billion in one locally domiciled ETF giving it a 15.8% market share at the end of May 2009.

At the end of May there were 163 ETFs cross-listed in Mexico from eight providers. In Chile there were 247 ETFs registered for sale from eight providers and 184 ETFs registered for sale in Peru from 10 providers.

The first ETF to launch in Latin America was the NAFTRAC, designed to track the Mexican Bolsa Index. Since launching in 2002 in Mexico by Nacional Financiera it became the largest ETF in the region with over $4 billion in assets under management at the end of May 2009. On May 14 it was acquired by iShares and has been renamed iShares NAFTRAC.

The first emerging market ETF was launched in March 1996. ETFs that track global emerging market indices such as the MSCI Emerging Markets Index providing investors with diversified exposure to 25 emerging market countries. There are many ETFs providing global, regional and single country emerging market exposure with TERs ranging from 0.19% to 1.50%.

ETFs are open-end index funds that provide daily portfolio transparency, are listed and traded on exchanges like stocks on a secondary basis as well as using a unique creation and redemption process for primary transactions.

* ETF landscape: Latin America Industry Review, BarclaysGlobal Investors, June 2009.