The iShares MSCI Peru and Global Exposure ETF (EPU) seeks to track the MSCI All Peru Capped Index, which measures the performance of large- and mid-cap Peruvian companies and foreign companies with significant business exposure to Peru's economy. This emerging market equity ETF provides concentrated exposure to Peru's commodity-driven economy.
How It Works
EPU uses a passively managed, market-capitalization-weighted approach that mirrors its benchmark index. The fund holds Peruvian-domiciled companies and international firms generating substantial revenue from Peru, with individual holdings capped at 25% to prevent over-concentration. Rebalancing occurs quarterly to maintain index alignment. The portfolio typically contains 15-25 holdings heavily weighted toward mining, financial services, and consumer sectors that drive Peru's economy.
Key Features
- Only U.S.-listed ETF providing pure-play exposure to Peru's economy through both domestic companies and international firms with Peruvian operations
- Attractive 3.55% dividend yield reflecting Peru's dividend-paying mining companies and established financial institutions
- Zero expense ratio makes it cost-effective for accessing this niche emerging market compared to mutual fund alternatives
Risks
- This ETF can lose significant value during commodity price declines, particularly copper and gold, as Peru's economy heavily depends on mining exports
- Political instability and regulatory changes in Peru can trigger sharp selloffs, with the fund potentially declining 40-60% during crisis periods
- High concentration in 15-25 holdings means individual company problems can disproportionately impact overall fund performance compared to diversified emerging market ETFs
Who Should Own This
Best suited as a small satellite holding (1-3% of portfolio) for experienced investors with high risk tolerance and 3+ year time horizons seeking emerging market diversification. Appropriate for tactical allocation during commodity upturns or as part of a broader Latin American investment strategy.