In the past, the ETF was viewed as a tactical position management tool, designed to be very flexible and quick to enter and exit the market. This paradigm is changing. More and more investors see the ETF as a long-term investment vehicle and all ETF providers are convinced that the strategic use of the product is becoming increasingly important. The ETF is an instrument that is increasingly finding its place in long-term investment portfolios.
Geographical diversification is becoming increasingly important as new locations and favorable environments emerge over time. A clear example of this is an ETF that places us squarely in one of the emerging markets with the best prospects: Vietnam. The strategy here is clear. Position yourself in Asia and avoid direct investments in China, a country whose risk premium is high due to its position alongside Russia in the current geopolitical conflict. And it is that Europe and Asia Pacific, especially Japan, are becoming very cheap places to invest, especially in variable income.
And what about Latin America? Of the funds that achieved quarterly returns above 20%, four relate to Brazilian equities. Notably, Brazil returned 20.67% (in dollar terms) in the second quarter of 2023, while the cumulative return in 2023 is 16.84%. Brazil makes up nearly 60% of the MSCI EM Latin America Index. But Latin America also returned 14.3% in the second quarter, almost half the year’s accumulated return (30.68%).
Latin America was one of the markets, if not the one, that performed best at the end of the quarter that had already ended, partly due to the general strength of its currencies, which saw the heavy inflow of capital flows into the country has due to the high fixed income Compensation played a role. The region thus achieves an annual return of around 19%, while it was up to 30.7% in the second quarter.
Climate change, in turn, is affecting virtually every aspect of our lives and will not diminish in terms of our investments. Many sectors can (and are) severely affected as their activity depends directly or indirectly on weather conditions. Therefore, it is not trivial to take this aspect into account for certain investments.