Brazil Fund VS Brazil iShares

Today I wanted to continue my ETF connect series by comparing the Brazil Fund (BZL) and the Brazil iShares (EWZ).

First I would point out that there is a lot going on in Brazil with respect to growth, natural resources, trade with China and India, and an evolving financial system. I have invested in Brazil both personally and for clients using individual stocks only. While I have been successful both times I have traded Brazil, I can't discount the possibility that I benefited more from luck than skill.

Energy makes up roughly 26% of both funds. Materials (mining names are included here) makes up 31% of the iShares and 25% of the closed end. Financials make up 11% of both funds. There are also similar weightings in telecom and food related stocks. So it should be no surprise that the performance has been almost identical with the nod going to the iShares, no doubt because of the lower expense ratio (0.74% vs. 2.04%).

Petroleo Brasileiro (and its preferred issue) and Companhia Vale do Rio Doce (and its preferred issue) make up 38.5% of the iShares and the common class of those two names make up 41.5% of the closed end.

One difference is the dividend. The iShares only yields 0.8% but the CEF yields 2.08%. Often, emerging market stocks pay a very healthy dividend. If you own either the ETF or CEF you may be getting less yield than you could by owning an individual name like Companhia Vale do Rio Doce which yields about 4.5% according to Yahoo finance or Petroleo Brasileiro which yields 4.2%. Keep in mind these dividends fluctuate.

I would rather own one of these names than either fund I have profiled. Both stocks have a high long term correlation to the index with a much better yield. I don't own either name now, I have owned each one in the past and may buy either one again.