Indexes act as “thermometers” of the performance of a market, a sector, a country, a region. ” ETFs” are passive investment instruments aiming to replicate an index.
An ETF is the best of two worlds: it gives exposure to the diversification offered by funds and operates under the same conditions as a stock on an Exchange.
That way, investors can get exposure to a whole index through a single transaction, and can trade throughout the session.
The Mexican Peso is currently the 9th most traded currency in the world and the 2nd of any emerging country (publication of the BIS 2016). Having exposure to currencies brings two major advantages:
Diversification: the currency market has a low correlation with other asset classes
Speculation: The volatility of the Peso/Dollar exchange rate is an opportunity to increase the yield of your portfolios.
Although the price of our titles don´t reflect the exchange rate directly, Dólar Trac and Peso Trac reproduce the daily return in percentage of the exchange rate Dollar/Peso and Peso/Dollar.
For example, if one day the Dollar rises 2% vs. the Peso, Dólar Trac will increase by 2% and Peso Trac will go down by 2%. The same way, if the Dollar falls by 5% against the Peso, Dólar Trac will fall by 5% and Peso Trac will have a 5% increase.
Dólar Trac and Peso Trac replicate the daily performance of their indexes, which are calculated by S&P/BMV (Mexican Stock Exchange) from the Reuters quote MXN=.
The index Dólar Trac replicates is S&P/BMV MXN-USD, which emulates the behavior of the SPOT exchange rate in Pesos per Dollar. It is calculated multiplying MXN= by 1,000.
The index the Peso Trac replicates is S&P/BMV USD-MXN, which emulates the SPOT exchange rate of Dollars per Peso. It is calculated as follows: 100/ Dólar Trac.
Dólar Trac and Peso Trac are listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores, BMV) and their tickers are DLRTRAC15 and PSOTRAC15.
They are classified as Debt ETFs (value type 1-C), trade until 2:00pm and settle in T+48h. On the secondary market, the price oscillates around the INAV (Intraday Net Asset Value, which is the theoretical price of the stock, calculated every 15 seconds by the BMV).
The primary market addresses larger trades by units (200,000 titles per unit), created or redeemed by Authorized Participants.
On the Secondary market, you can buy as little as one stock, you need to have a brokerage account and you have to understand the risks involved with this kind of investment.
The funds are invested in CETES (Mexican Treasuries), and buy (Dólar Trac) or sell (Peso Trac) futures contracts on the US Dollar from the MexDer. The Futures are the most liquid ones, i.e. of the next two quarterly expiration dates. The possibility to operate on the Chicago Mercantile Exchange (CME) is also open to us.The proportion of CETES and Futures in the funds is 1:1, i.e. the amount of money invested in CETES is equal to the notional value of the Futures. In other words, the ETFs do not use leverage.
If you think the Dollar will gain value against the Peso: buy Dólar Trac!
If you think the Peso will gain value against the Dollar: buy Peso Trac!
Potential high returns as long as volatility exists in the exchange rate
Position aiming at making a profit at medium/long term
Neutralize partially or fully the currency risk of investing in Dollar nominated titles for Mexican investors (with the Peso Trac)
| Currency reserve requirements
Acquiring titles emulating the behavior of the Dollar
Once an initial allocation has been defined, the highest yields can be obtained by moving from one ETF to the other.As can be seen in the monthly Fact Sheets, potential maximum results that could be obtained during the corresponding month have varied between 4.65% and 23.23%, passing from one fund to the other (simulation with closing price). It is almost impossible to obtain these theoretical results, since perfect market timing is a difficult task, nonetheless they picture the magnitude of the opportunity.Furthermore, we publish weekly on social networks the maximum yield obtained from operations in the secondary market.
Market risk: The ETFs price vary according to the economy, politics, international markets, investors sentiment etc.
Underlying risk: the value of the ETF is exposed to the risks specific to each of the issuers of the underlying titles and contracts (CETES and Futures). Practically, if the market moves contrary to the expectation, the loss will be equivalent to the loss of one currency against the other, without any leverage effect.
Accessibility: Real-time exposure to the foreign exchange market
INAV: calculated and published every 15 seconds throughout the trading day
Operational efficiency: it operates like a stock on the Mexican Stock Exchange
Interbank market prices: without high spreads between buying and selling
Intraday trading: throughout the session
Liquidity: both on the primary and the secondary market
Transparency: All information is published on the website of the BMV, no hidden costs
- Advantages vs. an account in dollars
- Easy exchange between dollars and pesos.
- More efficient execution
- No minimum amounts
- No currency flow between countries
- Advantages vs. buying and selling dollars with an currency exchange house
- No high spreads between buying and selling
- Eliminates the risk of carrying cash
- Advantages vs. indexed funds
- Operations can be performed during the day as prices fluctuate in real time like the Spot, unlike a mutual fund that operates at closing price
- Advantages vs. Forwards and Futures contracts
- Our ETFs are not leveraged, they don´t have a maturity date nor need margin calls