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Brazil has been attracting investor attention for several years. It is an emerging market economy, and as a BRIC (Brazil, Russia, India, and China) country, it has been producing stellar results for investors who are willing to take on some additional risks. However, emerging markets overall carry extra risk because their economies are growing but can be unstable. 

One of the best ways to gain exposure to Brazil is through exchange-traded funds (ETFs​). Because these funds invest in a variety of stocks, you have more protection than you would if you bought a single stock.

Brazilian ETFs produced good returns throughout 2017, but have stumbled since 2018 through 2020. Nonetheless, longer term, the ETFs could represent a good investment, provided investors choose judiciously. We have listed the top four based on total assets and track record beyond 2020.

Data for the funds is accurate as of November 9, 2020.

Key Takeaways

  • Brazil's economy has been experiencing ups and downs over the past few years, with its markets hit particularly hard by the 2020 COVID19 pandemic, but may be poised for a bounce back.
  • Investors can gain access to the Brazilian economy using these three exchange-traded funds (ETFs).
  • Here, we take a closer look at some particular Brazil ETFs, including leveraged ones.

1. VanEck Vectors Brazil Small-Cap ETF (BRF)

  • Avg. Volume: 8,500
  • Net Assets: $44.4 million
  • Dividend Yield: 4.38%
  • 2020 YTD Return: -33.25%
  • Expense Ratio: 0.63%
  • Inception Date: May 12, 2009
  • Share Price: $18.31

The VanEck Vestors Brazil Small-Cap ETF (BRF) focuses on small-cap stocks in Brazil. It uses the MVIS Brazil Small-Cap Index as its benchmark, investing a minimum of 80% of its assets in securities from that index. It may invest in micro-cap stocks. This means you must be willing to take on more risk. Of course, it also means you could have higher returns.

The year-to-date returns on this ETF have been problematic, but longer term results have been solid. The Fund and Index count any company as Brazilian that receives at least 50% of its revenues in Brazil or has 50% of its assets in Brazil.

2. iShares MSCI Brazil Small-Cap (EWZS)

  • Avg. Volume: 58,700
  • Net Assets: $91.2 million
  • Dividend Yield: 1.86%
  • 2020 YTD Return: -31.89%
  • Expense Ratio: 0.59%
  • Inception Date: September 28, 2010
  • Price: $15.00

The iShares MSCI Brazill Small Cap ETF (EWZS) invests in companies that are in the bottom 14% of the Brazilian market, based on capitalization. This ETF is for investors who like small-caps. EWZS uses the MSCI Brazil Small Cap Index as its benchmark. The Fund is not leveraged. While it invests at least 90% of assets in securities from the underlying Index, it also invests in securities outside the Index.

3. ProShares Ultra MSCI Brazil Capped (UBR)

  • Avg. Volume: 3.4 million
  • Net Assets: $4.77 million
  • Dividend Yield: N/A
  • 2020 YTD Return: -72.88%
  • Expense Ratio: 0.95%
  • Inception Date: April 27, 2010
  • Price: $108.66

The ProShares Ultra MSCI Brazil Capped ETF (UBR) is a leveraged ETF. This fund seeks two times the return of the MSCI Brazil 25/50 Index. As a leveraged fund, UBR uses leveraged instruments which means it may borrow money to buy securities. This approach adds some additional risks for investors.

Holdings in the Fund primarily include iShares MSCI Brazil swap contracts.

4. Direxion Daily Brazil Bull 2X ETF (BRZU)

  • Avg. Volume: 328,400
  • Net Assets: $179.5 million
  • Dividend Yield: 10.67%
  • 2020 YTD Return: -94.04%
  • Expense Ratio: 1.29%
  • Inception Date: April 10, 2013
  • Price: $87.26

The Direxion Daily Brazil Bull 2x ETF (BRZU) is also a leveraged ETF. It takes an aggressive leveraged position, seeking to generate two times the return of the MSCI Brazil 25/50 Index. The MSCI Brazil 25/50 Index focuses on large-cap and mid-cap stocks. BRZU invests in the iShares MSCI BRAZIL Capped ETF (EWZ). Its holdings also include swap contracts on the iShares MSCI Brazil Capped ETF as well as cash instruments. After a strong 2017, the ETF has been hit hard in 2018 through 2020.