Global X Management Company LLC (“Global X ETFs”) is an investment firm that oversees the development of the Global X-branded investment products in Latin America. Global X ETFs acts as Portfolio Manager for Colombia Select ETF (“HCOLSEL”), an exchange traded fund domiciled in Colombia.
Daily closing values: Global X publishes an ETFs previous day’s closing market price and closing net asset value (NAV) per participation unit on its website.
Intraday values: An ETFs indicative intraday value, known as its Indicative Optimized Portfolio Value (IOPV), represents an estimate of an ETFs current fair (or theoretical) value. By comparing the IOPV with current bid/ask prices, investors and the general public can see whether an ETF is being priced fairly in the market and determine a price at or around which they might want to place a limit order. Indicative intraday values are calculated at 15-second intervals throughout the trading day. Consult your quotation service provider (e.g., Bloomberg or Thomson Reuters) for more information on how to look up an IOPV on your trading platform.
Secondary Market Price: The price at which the participation units of the ETF trades on the Bolsa de Valores de Colombia (BVC) at any particular time during the trading day.
“ETF” stands for exchange traded fund. Like mutual funds, ETFs invest in an underlying basket of assets, such as stocks, bonds, currencies, options or commodities. Unlike mutual funds, however, the participation units of ETFs trade like ordinary shares, meaning that pricing is transparent and that ETFs can be bought and sold throughout the regular trading day on the stock exchange. ETFs generally aim to track, as closely as possible, the performance of a given index or asset class, before fees and expenses. They are transparent, liquid, cost-efficient and flexible investment tools – designed to be attractive to both individuals and institutional investors. In Colombia this type of instrument is known as a stock fund pursuant to Decree 2555 of the Republic of Colombia.
Investors can use ETFs to:
Passive index investing is a strategy whereby an investor buys a diversified market or sector index fund instead of picking individual stocks.
The approach has many potential benefits, including:
Lower transaction costs: The investor is able to gain instant exposure to an entire index or sector through one transaction rather than the multiple transactions required to buy many stocks individually.
Lower management fees: Index ETFs generally have much lower management fees than actively managed diversified investment funds.
Avoidance of market timing: Investors can avoid the difficulties and risks associated with trying to time the purchase of individual stocks, as well as the extensive costs associated with analyzing company-specific factors. A large body of empirical evidence suggests that many active portfolio managers are not able to significantly outperform their benchmark indices, over the long term, after fees and expenses. This observation seems to be supported by certain forms of the efficient-market theory.
Market returns: A passive ETF that tracks a particular index or sector generally achieves performance, before fees and expenses, in line with the performance of its underlying index or sector.
ETFs may make distributions of net investment income and/or capital gains, if any, on a monthly, quarterly, semi-annual or annual basis. Until a potential distribution date, any net investment income that the ETF receives from its underlying assets is reflected in the ETFs net asset value (NAV).
ETFs charge a management fee that is deducted from the assets of the ETF. This fee is specified in the constating documents approved by the Financial Superintendency of Colombia. It is expressed as an annualized percentage of assets. The ETFs daily net asset value (NAV) indicates the value of the ETF after (“net of”) the deduction of management fees. For example, an investor who owns $100,000 of an ETF with a management fee of 0.60% (or “60 basis points”) would pay $600 in management fees over the course of a year (assuming no change in the market value of the ETF).
Since investors buy and sell ETF participation units through a brokerage account or an investment adviser like ordinary stocks, brokerage commissions and/or transaction costs or service fees may apply. Please consult your broker or financial advisor for their fee schedule.
Purchases or sales of participation units of ETFs traded in the secondary market through the Bolsa de Valores de Colombia (BVC) settle in cash in three business days (T + 3).
Participation units may be purchased or sold at any time throughout the regular trading day. There is no minimum holding period and no minimum investment.
Only Authorized Participants may create or redeem very large blocks of participation units known as “Creation Units” directly with the Management Company, Cititrust Colombia S.A. Sociedad Fiduciaria.
ETFs generally have three sources of liquidity:
An ETFs market price is not necessarily the same as its net asset value (NAV) per share. All ETFs have two end-of-day “values”. One is a closing market price, which is determined by trading activity in the ETFs shares on the stock exchange (usually the price at which the shares last traded during a trading session).
The second is the net asset value (NAV) per share, which is calculated by the ETFs independent fund accountant after the market closes. The ETFs NAV is the weighted average price of each of its underlying assets, plus income and cash, minus liabilities such as management fees and expenses.
An ETFs market price and NAV per share are typically close to each other but they may differ, especially in times of heightened market volatility.
A premium or discount to NAV per share occurs when the market price of an ETF trades on the exchange above or below the NAV per share of its underlying basket of securities. For example, an ETF may trade at a premium or discount when:
Tracking error is the difference over time between the performance of an ETF and the performance of the benchmark it follows (or “tracks”), such as an index. Most index ETFs track their benchmarks closely, but tracking error can occur as a result of fees and/or because some benchmarks are difficult to replicate perfectly. For example, an ETF with a management fee of 0.65% can be expected to have a tracking error of approximately 0.65% over the course of a year.
A Market Maker is a stock brokerage company whose function is to provide liquidity and to attempt to maintain a tight bid/ask spread so that the market price of the ETF participation units closely approximates (tracks) its NAV per participation unit. It provides liquidity by buying or selling participation units from its own inventory when there are few buyers or sellers in the market. This allows investors to get their orders filled when they choose to execute a trade, regardless of trading volume.
Investors do not request the creation and redemption of ETF participation units directly involving the Management Company in the same way they would with traditional mutual funds. ETFs are designed to minimize portfolio turnover costs by trading in the secondary market through a stock exchange. ETFs restrict the direct creation and redemption of very large blocks of participation units (known as “Creation Units”) to certain brokerage firms (referred to as “Authorized Participants”) selected by the Fund Manager.
These institutions can create and redeem participation units daily to meet market demand and to absorb excess supply, which helps the ETF to trade with maximum liquidity.
Authorized Participants – Subscribing for Creation Units Direct from the Manager
Only brokerage firms selected by the Portfolio Manager who have entered into an Authorized Participant agreement with the Management Company may apply to the latter to create or redeem Creation Units*.
* While individual participation units can be bought or sold in the secondary market through the stock exchange, they are not individually acquired from, or redeemed by the Management Company directly; however, Authorized Participants may create (or redeem) very large blocks of participation units known as “Creation Units” directly from the Fund. The Fund issues and redeems participation units on a continuous basis, at NAV, only in blocks of at least 10,000 participation units (“Creation Units”), principally in exchange for a payment in-kind which usually consists of the securities included in the relevant Index.
Investors outside of Colombia may be able to purchase participation units of ETFs trading on the Bolsa de Valores de Colombia (BVC) provided they have access to the exchange through a registered brokerage firm in compliance with the requirements set out by the Bank of the Republic of Colombia for this type of investment in the jurisdiction of Colombia.
Foreign shareholders (i.e., non-resident alien individuals and foreign corporations, partnerships, trusts and estates) may be subject to Colombian withholding taxes, unless a lower treaty rate or certain exemptions apply. For more information, please read an ETFs constating documents and consult your tax or financial advisor.
As with all funds, exchange traded funds (ETFs) generally are subject to the risks involved with investing, including (among others) the risk of possible loss of principal resulting from fluctuations in the prices of the assets making up an ETF. Diversification cannot protect against market risk. Securities concentrated in a single country or a single region or sector may be subject to greater volatility. Other kinds of risks are also associated with ETF investments and are described in the constating documents. Please read the constating documents carefully before investing.
To learn more, please contact your broker/financial advisor or Global X ETFs directly at + 57 1 319 2706 or e-mail: [email protected]
Write: Global X ETFs
Carrera 7 # 71 -21 Torre B Oficina 1301
The Global X Colombia Select ETF (“HCOLSEL”) seeks investment results that, before fees and expenses, are comparable to the S&P Colombia Select Index (the “Index”), which is designed to track the performance of the largest and most liquid stocks listed on the Bolsa de Valores de Colombia (“BVC”).
Fiduciaria Bogotá S.A (Fidubogotá) is one of Colombia’s largest mutual fund providers. It acts as the management company of the Global X Colombia Select ETF. More information can be found on the Fiduciaria Bogotá website. www.fidubogota.com.
Created and calculated by Standard & Poor’s, one of the world’s most recognized index providers, the S&P Colombia Select Index is designed to be a sector diversified benchmark index of the Colombia equity market.
The obligations of the respective Management Company of each exchange traded fund (“ETF”), and the Portfolio Manager, Global X Management Company LLC (“Global X ETFs”), responsible for managing the portfolios, are ones of due diligence and in no case of guaranteed performance for Investors. The assets and funds supplied by Investors to the Authorized Participants for participation in the ETFs are not deposits nor do they generate for the Stock Brokerage Companies, the Management Companies or the Portfolio Manager, the obligations of a deposit institution and are not covered by the deposit insurance of the Guarantee Funds of Financial Institutions, FOGAFIN, nor by any other scheme of this nature.
Investments in the ETFs are subject, among others, to market risk resulting from fluctuations in the prices of the assets of each respective ETF portfolio. Diversification cannot protect against market risk. Securities concentrated in a single country or a single region or sector may be subject to greater volatility. Other kinds of risks are also associated with the investments described in the Rules and in the Prospectus of each ETF. Investors may access these Rules through the respective Management Company’s website. Furthermore, a printed version of the Rules is available at the offices of the respective Management Company and at the offices of the Authorized Participants.
Global X ETFs is a member of Mirae Asset Financial Group, a Seoul-based global enterprise which offers asset management expertise worldwide.
Please see the ETF website pages for disclosure regarding applicable registered trademarks and the licensing of such trademarks.
The automatic registration of the Documents Representing the Shares of each ETF in the National Registry of Securities and Issuers, in accordance with the terms of Article 184.108.40.206.3 of Decree 2555, does not imply certification of the Colombian Financial Superintendency regarding the profitability of any ETF nor the security of the investments.
The Colombian Financial Superintendency advises potential investors that the ETFs are products involving risk, therefore, when making any decision to invest, Investors must read all the information carefully and must ensure they understand it correctly and adequately, without prejudice to the responsibilities of Stock Brokerage Companies as set out in Decree 2555.
Potential investors must read the Prospectus and the Rules to adequately evaluate the appropriateness of the investment.
The inscription of the Documents Representing the Shares in the National Securities and Issuers Registry does not imply any qualifications or responsibilities on behalf of the Colombian Financial Superintendency towards individuals or legal entities regarding the price, value or negotiability of the security or the respective issuance, or the solvency of the issuer.
The registration of the Documents Representing the Shares in the Bolsa de Valores de Colombia S.A. does not imply certification regarding the price or the negotiability of the securities or their issuing or the solvency of the issuer by the Bolsa de Valores de Colombia.
Promotion and offer of the products and services of a foreign financial corporation represented in Colombia. Global X is a representative office of a financial institution domiciled in the United States of America and authorized by the Superintendence of Finance of Colombia to advertise and offer financial products and services in Colombia.
Any agreement between a potential client and Global X will be ruled by the competent judges of the relevant jurisdiction of the product or service and, therefore, the Colombian figure of a financial advisor of the financial consumer is inapplicable in this relationship. Global X has established multiple attention channels for the requests or complaints of its clients, which can be filed here.