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We have identified the five best Brazil ETFs that you can buy.
But before we examine them, let’s briefly review the Brazilian economy so you can better understand the construction and investment potential of these exchange-traded funds.
Best Brazil ETFs: Background and Trends
Brazil is a global leader in mining, agriculture, and manufacturing. It produces minerals such as iron ore, aluminum, gold, and diamonds, while also being a major exporter of steel, automobiles, coffee, and oranges.
Technological advancements in the region have created the necessary infrastructure to process these primary resources in Brazil instead of exporting them.
Many Latin American countries are forced to export the vast majority of their resources because they lack the manufacturing capabilities that Brazil has developed.
In combination with its expanding infrastructure, Brazil’s resource-rich territory is why it’s typically the largest country-allocation in Latin American ETFs and why its percentages have increased in the best emerging market ETFs.
Best Brazil ETFs: Overview
Before we analyze each ETF individually, here’s a quick overview of the best Brazil ETFs:
- iShares MSCI Brazil ETF (EWZ)
- iShares MSCI Brazil Small-Cap ETF (EWZS)
- Franklin FTSE Brazil ETF (FLBR)
- First Trust Brazil AlphaDEX Fund (FBZ)
- VanEck Brazil Small-Cap ETF (BRF)
The name of the funds do a fair job of describing their objectives. For example, EWZS and BRF focus on small-cap Brazilian equities, while EWZ, FLBR, and FBZ are more broad-based.
These ETFs have relatively high dividend yields, ranging somewhere between 1.9% and 4.0%. But without further delay, let’s get started.
#1. iShares MSCI Brazil ETF (EWZ)
- 1-Year Performance: -9.45%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 2.87%
- AUM: $5.2 billion
- 3 Month Avg. Volume: 25,465,816
- Number of Holdings: 53
- Brazilian Weighting: 91.54%
- Inception Date: 2000
The iShares MSCI Brazil ETF provides exposure to mid-and large-cap Brazilian equities.
This is the oldest and largest Brazil ETF on the market. It launched 22 years ago and has soaked up $5.2 billion in net assets.
Those assets are primarily invested in the Materials, Financials, Energy, and Consumer Staples sectors of the economy, which account for 25%, 22%, 16%, and 10%, respectively.
EWZ’s top two holdings, Vale and Petroleo Brasileiro, make up a combined 32% of the $5.2 billion in this fund. That is a lot.
Vale is the world’s largest iron ore, pellets, and nickel producer. In addition to mining, Vale is a global leader in logistics via its network of railways, ports, and terminals for the energy and steel-making industries.
Petróleo Brasileiro, also known as Petrobras, is a state-owned multinational corporation in the petroleum industry.
It’s one of the largest 75 companies in the world and a fundamental component of Brazil’s critical infrastructure,
EWZ is perhaps your best option if you’re seeking general exposure to Brazil.
EWZ Top Holdings:
- Vale (VALE3:BSP) 17.84%
- Petróleo Brasileiro (PETR4:BSP) 8.30%
- Petróleo Brasileiro (PETR3:BSP) 6.99%
- Itaú Unibanco Holding (ITUB4:BSP) 6.09%
- Banco Bradesco (BBDC4:BSP) 5.56%
#2. iShares MSCI Brazil Small-Cap ETF (EWZS)
- 1-Year Performance: -7.87%
- Expense Ratio: 0.59%
- Annual Dividend Yield: 2.28%
- AUM: $106 million
- 3 Month Avg. Volume: 110,011
- Number of Holdings: 103
- Brazilian Weighting: 96.91%
- Inception Date: 2010
The iShares MSCI Brazil Small-Cap ETF provides targeted access to Brazilian small-cap stocks. Hence the fund’s ticker symbol, “EWZS,” or EWZ small.
This ETF requires a larger appetite for risk. Not only are you investing in an emerging market, but you’re investing in emerging companies within an emerging market.
The previously mentioned EWS has 0% exposure to companies less than $600 million in market cap, whereas EWZS is 88% invested in companies below that threshold.
Small-cap stocks tend to be more volatile than large-caps, perhaps even to greater degrees in the emerging markets.
From a sector perspective, EWZS is less invested in the Materials industry than you might expect, allocating just 8% compared to 25% from EWZ.
EWZS’s top sectors include Industrials (19%), Consumer Discretionary (19%), Utilities (16%), and Consumer Staples (12%).
BlackRock recommends pairing EWZ and EWZS for comprehensive Brazil coverage.
However, that strategy comes with high fees and requires you to own multiple funds.
The next ETF on our list provides exposure to equities of all sizes and has much lower fees than EWZ and EWZS. But before we go there, let’s see the top holdings in EWZS.
EWZS Top Holdings:
- Petro Rio (PRIO3:BSP) 4.10%
- Embraer (EMBR3:BSP) 4.04%
- Sendas Distribuidora (ASAI3:BSP) 2.80%
- Eneva (ENEV3:BSP) 2.57%
- Marfrig (MRFG3:BSP) 2.48%
#3. Franklin FTSE Brazil ETF (FLBR)
- 1-Year Performance: -8.74%
- Expense Ratio: 0.19%
- Annual Dividend Yield: 3.45%
- AUM: $306 million
- 3 Month Avg. Volume: 158,563
- Number of Holdings: 106
- Brazilian Weighting: 93.57%
- Inception Date: 2017
The Franklin FTSE Brazil ETF consists of 106 large-, mid-, and small-cap Brazilian equities.
It is the most balanced Brazil ETF in terms of market capitalization breakdown, with 55% exposure to large-caps, 36% to mid-caps, and 9% to small-caps.
Additionally, FLBR has the lowest expense ratio amongst the Brazil ETFs. The providers collect just 0.19% of invested assets.
FLBR also offers a higher dividend yield than the previous two funds, paying out an above-average 3.45% of the share price.
The top holdings in FLBR are almost identical to those in EWZ. It has large allocations to the leaders of the Brazilian economy: Vale and Petrobras, rightfully so, in our estimation.
However, as mentioned above, FLBR provides some exposure to smaller equities.
We recommend owning FLBR instead of buying both EWZ and EWZS if you think you need exposure to small-cap Brazilian equities.
FLBR Top Holdings:
- Vale (VALE3:BSP) 15.78%
- Petróleo Brasileiro (PETR4:BSP) 8.65%
- Petróleo Brasileiro (PETR3:BSP) 6.21%
- Itaú Unibanco Holding (ITUB4:BSP) 5.33%
- Banco Bradesco (BBDC4:BSP) 4.76%
#4. First Trust Brazil AlphaDEX Fund (FBZ)
- 1-Year Performance: -1.56%
- Expense Ratio: 0.80%
- Annual Dividend Yield: 4.07%
- AUM: $12.2 million
- 3 Month Avg. Volume: 20,560
- Number of Holdings: 51
- Brazilian Weighting: 91.13%
- Inception Date: 2011
The First Trust Brazil AlphaDEX Fund uses a proprietary stock selection methodology to select stocks from the NASDAQ Brazil Index that meet certain criteria.
This methodology ranks eligible stocks on growth factors, including variable monthly price appreciation, sales to price, and one-year sales growth.
It also ranks the equities on value factors, including book value to price, cash flow to price, and return on assets.
The fund managers group the equities into tiers based on their score and then assign larger allocations to higher ranking equities and lower allocations (if any) to lower-ranking equities.
The methodology results in a modified equal-weighted ETF where allocations are similar within each tier.
All of this proprietary ranking comes at a cost to the investor. FBZ has the steepest expense ratio of 0.80%. That’s about 4x more expensive than FLBR.
Granted, FBZ has been the best performing Brazilian ETF over the trailing 12-month period while also paying out the largest dividend yield.
FBZ Top Holdings:
- Petróleo Brasileiro (PETR4:BSP) 8.65%
- Companhia Paranaense de Energia (CPLE6:BSP)
- Usinas Siderurgicas de Minas Gerais (USIM5:BSP) 3.49%
- Companhia Siderúrgica Nacional (CSNA3:BSP) 3.41%
- Gerdau (GGBR4:BSP) 3.34%
#5. VanEck Brazil Small-Cap ETF (BRF)
- 1-Year Performance: -14.15%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 1.89%
- AUM: $32.5 million
- 3 Month Avg. Volume: 13,720
- Number of Holdings: 100
- Brazilian Weighting: 89.91%
- Inception Date: 2009
The VanEck Brazil Small-Cap ETF seeks to replicate the performance of small-cap Brazilian equities.
About 15% of the fund is invested in companies not based in Brazil but generating at least half of their revenues in the region.
BRF has a similar objective as EWZS – provide small-cap Brazilian equity exposure – so we’ll compare these two in more detail.
They pretty much have the same expense ratio. BlackRock might be trolling VanEck slightly, considering they charge 0.01% less.
The EWZS ETF is about 3x larger than BRF and trades about 10x the daily volume, so you’ll get better liquidity with EWZS.
While both funds invest in “small-caps,” their holdings substantially vary.
About 20% of BRF is invested in micro-cap stocks compared to just 8% from EWZS. These are companies with a market cap of less than $600 million.
EWZS also has some exposure to mid-cap companies around the $2B-$5B range (12% of assets), whereas BRF has zero exposure in that range.
These differences are why EWZS and BRF have had different returns over the last year.
The riskier micro-caps have gotten beaten up and caused BRF to underperform.
BRF Top Holdings:
- BR Malls Participacoes (BRML3:BSP) 2.89%
- Alupar Investimento (ALUP11:BSP) 2.75%
- Sao Martinho (SMTO3:BSDP) 2.72%
- Cia de Saneamento do Paraná (SAPR11:BSP) 2.64%
- Grupo de Moda Soma (SOMA3:BSP) 2.58%
Alternatives to the Best Brazil ETFs
Several funds invest in the broader Latin American region but provide adequate exposure to Brazil.
Here are the top Latin American ETFs and their corresponding allocation to the Brazilian region:
- Franklin FTSE Latin America ETF (FLLA) 61.58%
- iShares Latin America 40 ETF (ILF) 59.07%
- First Trust Latin America AlphaDEX Fund (FLN) 51.19%
- First Trust BICK Index Fund (BICK) 21.89%
We believe the iShares Latin America 40 ETF (ILF) is your best option amongst these funds, given its reasonable expense ratio, a healthy allocation to Brazil, and superior liquidity.
Best Brazil ETFs: Frequently Asked Questions
How do I invest in a Brazilian Real ETF?
You can invest in a Brazilian ETF by purchasing one that is publicly listed on a U.S. stock exchange, such as the iShares MSCI Brazil ETF (EWZ), iShares MSCI Brazil Small-Cap ETF (EWZS), Franklin FTSE Brazil ETF (FLBR), First Trust Brazil AlphaDEX Fund (FBZ), or VanEck Brazil Small-Cap ETF (BRF).
What are the best investments in Brazil?
The best investments in Brazil tend to be in the Materials, Energy, and Financials industries. The two prominent holdings in several Brazil ETFs are Vale (VALE), a global leader in metals and mining, and Petroleo Brasileiro ADR (PBR), a global leader in the petroleum industry. Consider the iShares MSCI Brazil ETF (EWZ) or the Franklin FTSE Brazil ETF (FLBR) if you’re seeking exposure to these investments but also value diversification.
What is the best performing Brazil ETF?
Most of the Brazil ETFs have been underwater since their inception, except the iShares MSCI Brazil ETF (EWZ) since it launched at least a decade before its peers. EWZ has been up around 70% since it began trading in 2000. However, the First Trust Brazil AlphaDEX Fund (FBZ) has been the best performing Brazil ETF in the trailing 12-month period.
Bottom Line: Best Brazil ETFs
There you have it – the five best Brazil ETFs based on their performance, fees, diversification, dividend yield, and liquidity.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best Brazil ETFs.