ETF Momentum Tracker profiles iShares MSCI Chile (ECH) in the latest issue of the newsletter released today. ETF Momentum Tracker recently added ECH to its model portfolio.
“Until a few months ago Chile’s Santiago Stock Exchange—like many of its Latin American neighbors’—was doing well,” noted Don Dion, publisher of ETF Momentum Tracker, “thanks in part to the commodity price boom, fueled by insatiable demand from the developing world.”
The iShares MSCI Chile ETF gained nearly 9% in the first quarter, while the S&P 500 fell 10%. ECH hit an all-time high on April 23, but has fallen 17.9% since, including a 12% drop in the three months ended Aug. 29. Over the latter period, the S&P 500 fell just 8%.
“That’s not the kind of returns investors here have come to expect,” reflected Dion, “over the five years prior to the fund’s high, Latin American funds averaged a 44% annualized gain.”
Despite recent disappointments, Dion maintains that ECH has held up “better than most” amongst its peers. The ETF is off 7.3% this year—beating the MSCI EAFE Index by more than 11%. ECH’s three-month performance ranks in the top 1% of Latin American funds and beats the MSCI EAFE Index by more than two percentage points. ECH also outperformed iShares’ Emerging Markets (down 20.6%), Brazil (down 26.1%) and Latin America 40 (down 21.9%) for that period.
“ECH was promoted as an indirect play on growth in China and India,” Dion said, “thanks to its natural resources—and for having a market that is less risky than it used to be, backed by a growing domestic economy.” That, bulls say, may still be the case—at least in the long term.
Can ECH maintain the momentum necessary to remain in ETF Momentum Tracker’s model portfolio? “The bottom line is that ECH hasn’t been able to post the kind of otherworldly returns some came to expect,” Dion said “but it’s done better than its peers, making it an attractive niche play for direct exposure to Latin America and an indirect link to China.”
ETF Momentum Tracker is a member of Fidelity Independent Adviser’s family of financial publications. With more than 70,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
Don Dion, publisher of Fidelity Independent Adviser, is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $750 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.