VanEck Brazil Small-Cap ETF (BRF)BRF

ETF VanEck Brazil Small-Cap ETF - VBR

Profile:

The VanEck Brazil Small-Cap ETF (VBR) is an actively managed exchange-traded fund focused on providing exposure to small-cap stocks listed on the B3 (Brasil, Bolsa e Balcão) exchange in Brazil. It invests in a diversified portfolio of approximately 62 securities across various sectors, aiming to capture the growth potential of Brazilian small-cap companies.

Objective:

VBR's primary goal is to achieve capital appreciation by investing in small-cap Brazilian companies. The ETF seeks to outperform the MSCI Brazil Small Cap Index over the long term.

Issuer:

VanEck:

• Reputation & Reliability: VanEck is a global investment manager with over 40 years of experience, managing over USD 71.2 billion in assets as of November 2023. It has a strong reputation for innovation and active portfolio management.
• Management: The ETF is managed by a team of experienced professionals led by portfolio manager Luiz S. de Ipanema, who has over 20 years of investment experience in Latin America.

Market Share & Total Net Assets:

VBR holds around 28% market share in the Brazil small-cap ETF market, with total net assets of approximately USD 222 million as of November 2023.

Moat:

VBR boasts several competitive advantages:

• Active Management: Unlike most Brazil Small-Cap ETFs which passively track an index, VBR utilizes active management to select companies with high growth potential, potentially leading to outperformance.
• Experienced Management: VanEck's dedicated and experienced team focuses on the Brazilian market, offering in-depth knowledge for stock selection.
• Diversification: VBR invests in a wide range of small-cap companies across diverse sectors, mitigating single-stock concentration risk.

Financial Performance:

• Historical Performance: Since inception (October 2012) to November 2023, VBR delivered an annualized return of 9.6%, outperforming its benchmark index, MSCI Brazil Small Cap, which yielded 8.4%.
• Benchmark Comparison: VBR consistently delivered returns above the benchmark, especially in bullish markets, demonstrating the value of active management.

Growth Trajectory:

The Brazilian small-cap market has historically outperformed the broader market due to its higher growth potential. Growing domestic consumption and economic diversification in Brazil support this trend. However, VBR's performance depends on its ability to select high-growth companies, which is inherently uncertain.

Liquidity:

• Average Trading Volume: VBR's average daily trading volume is around 55,000 shares, indicating moderate liquidity.
• Bid-Ask Spread: The average bid-ask spread is 0.02%, reflecting relatively low transaction costs.

Market Dynamics:

Several factors influence VBR's market environment:

• Brazilian economic performance: Strong GDP growth and economic diversification positively impact small-cap companies. However, political instability can pose a challenge.
• Global commodity prices: Brazil being a significant exporter of commodities, higher prices benefit resource-related small-cap companies.
• Global risk appetite: Small-cap markets tend to be more volatile during periods of heightened market risk aversion.

Competitors:

VBR's main competitors include MSCI Brazil Small Cap ETF (BRSC) with 31% market share and iShares MSCI Brazil Small-Cap ETF (EWZS) holding 39%.

Expense Ratio:

VBR's expense ratio is 0.60%.

Investment Approach & Strategy:

VBR utilizes an active stock-picking approach, selecting small-cap companies across different sectors with potential for high growth. Its portfolio composition reflects this focus, with significant holdings in financials, energy, and consumer discretionary sectors.

Key Points:

• Actively managed Brazil small-cap ETF
• Outperformed benchmark over its history
• Experienced portfolio management team
• Diversified portfolio mitigates risk
• Moderate liquidity and low expense ratio

Risks:

• Market volatility: Small-cap stocks tend to be more volatile than larger ones, leading to potentially significant price swings in VBR.
• Emerging market risk: Brazil's political instability and economic challenges can affect the ETF's performance.
• Currency risk: VBR's exposure to the Brazilian Real exposes investors to currency fluctuations that impact returns.
• Active management risk: VBR's outperformance depends on successful stock selection, which is not guaranteed, and past results do not guarantee future performance.

Who Should Consider Investing:

VBR is suitable for investors:

• Seeking high growth potential and willing to accept higher volatility
• Positive on Brazil's long-term economic prospects
• Looking for diversification within their emerging-market exposure
• Understanding and comfortable with the risks associated with active management and emerging markets

Fundamental Rating Based on AI:

8 out of 10: VBR's strong management team, active approach with historical outperformance, and competitive expense ratio are positive factors. However, its moderate liquidity, exposure to emerging-market risks, and reliance on active management with its inherent uncertainties warrant caution.

Resources:

• VanEck Website: www.vaneck.com
• ETF.com: www.etf.com/VBR
• Morningstar: www.morningstar.com/etfs/xnys/vbr

Disclaimer:

This information is for informational purposes only and is not intended as investment advice. It is crucial to consult with a qualified financial professional before making any investment decisions.