ETF Fund Flows Show Investors are Kicking Brazil Out of Their Portfolios

“As Brazil remains a laggard in Latin America, more U.S. investors are pulling money from funds that track the emerging-market giant.

But portfolio managers aren’t convinced that such a shift is short-term performance chasing. Rather, they see longer-term political and economic problems facing Brazil.

“The immediate problem is that China looks less likely to turn into Brazil’s long-term savior,” says Lee Munson, chief investment officer at Portfolio LLC, an advisory firm in Albuquerque, N.M. that manages about $200 million in assets. “But the bigger picture is that people are realizing there are other intriguing markets in Latin America.”

The $9 billion iShares MSCI Brazil ETF (EWZ), the most popular of its kind tracking Latin America, saw outflows of $269.4 million in the three months through January, according to Morningstar. In contrast, the iShares MSCI Mexico (EWW) attracted $596 million in net inflows while the iShares MSCI Peru (EPU) had $117.1 million in positive flows during that same period. Another member of BlackRock Inc.’sBLK +0.03% (BLK) iShares family covering Chile also has been racking up inflows.

Meanwhile, the performance of the large-cap dominated Brazil ETF has been badly lagging many of its smaller regional rivals, both in the past 12 months as well as the last three years.

“Brazil has some strong cross currents that are developing into real head winds for investors,” says Paul Christopher, chief international investment strategist at Wells Fargo WFC +0.69% Advisors. The advisory arm of San Francisco-based Wells Fargo & Co. (WFC) runs about $8 billion in assets through ETF-managed portfolios….”

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