Van Eck to launch Latin America small cap ETF

Van Eck Global will launch an ETF providing exposure to Latin American small cap stocks tomorrow on NYSE Arca.

The Market Vectors Latin America Small Cap Index ETF will invest at least 80% of its total assets in securities constituting the benchmark index.

However, the fund might purchase a sample of securities in the index, if it is not possible to buy all the securities in proportion to their index weightings.

The Latin America Small Cap index is capitalisation weighted and designed to provide the performance of publicly traded companies that are domiciled in Latin America, or generate at least 50% of their revenues in the region.

However, Van Eck says companies with smaller capitalisations are exposed to elevated risks, including greater volatility, lower trading volume and less liquidity than larger companies.

The firm says the fund can also loan its securities, which could subject it to additional credit and counterparty risk.

Latin America's gross domestic product has increased at an average of 4.6% annually since 2005 and is due to continue rising at a rate that will surpass that of the G7 countries, according to the International Monetary Fund.

Van Eck says small cap stocks in Latin America are well placed to exploit local economic trends. These include growing household wealth and increases in consumer spending, as many of these countries have a rapidly developing middle class and domestic consumption rates.