iShares MSCI Peru and Global Exposure ETF (EPU)

EPU is a diversified exchange-traded fund that combines two strategic bets: direct exposure to Peru’s stock exchange and proportional exposure to developed-market equities worldwide. The fund holds roughly 300–400 positions split between Peruvian companies and a global equity benchmark, rebalancing semiannually. It is designed for investors seeking concentrated emerging-market play in Peru with a stability buffer from developed-country stocks.

Peru: the core conviction

The Peru leg of EPU tracks the MSCI Peru Index, which captures the major publicly listed companies on Peru’s stock exchange (the Bolsa de Valores de Lima, or BVL). Peru’s economy is driven by mining — copper, gold, and molybdenum — agriculture, fishing, and increasingly financial services. The index weights companies by their market capitalization; the largest are often mining firms and banks.

Peru is a classic emerging market: higher growth potential than developed countries, but also higher volatility and political risk. The country has experienced significant political instability, currency depreciation, and inflation in recent years, all of which ripple through stock prices. Mining companies in the index are commodity-linked, so EPU’s Peru portion swings sharply with copper and gold prices. That concentration in commodities and small-cap names means the Peru side of the portfolio can be volatile.

Global stabilizer

To moderate that volatility, EPU blends in the MSCI ACWI (All Country World Index), a broad developed-market and emerging-market index of the world’s largest companies. This global leg includes the USA, Europe, Japan, and other developed nations, plus a smaller slice of emerging-market mega-caps outside Peru. The ACWI piece brings stability and size: buying everything from Apple to Nestlé to TSMC.

The split is roughly 50-50, though the exact weighting can drift between rebalances. This blend is unusual — most emerging-market funds focus on one country or a basket of them, not blend one specific country with a global index. It makes EPU suitable for investors who want Peru exposure (a conviction bet on that economy) but do not want to bet the whole portfolio on one emerging nation.

Currency and hedging

EPU is unhedged, meaning it carries full exposure to currency movements. When the Peruvian sol weakens against the dollar, that can drag returns; when it strengthens, it can boost them. International investors (particularly US-based ones) feel currency swings directly. This is a key risk: a 20% decline in the sol could offset gains in the underlying stocks themselves. The fund also holds positions in euros, yen, and other currencies via the global leg, so currency volatility cuts in multiple directions.

Costs, liquidity, and fit

EPU has a low-to-moderate expense ratio because iShares runs it as a passive fund, simply replicating the two indices without active management. The ETF trades on NYSE Arca and is reasonably liquid, though trading volume is lighter than US-focused funds. Rebalancing occurs semiannually, which holds down costs.

This fund is typically used by investors who have a specific thesis about Peru’s economic growth or want emerging-market diversification with an overweight to Peru. It is less common in core portfolios and more often appears in satellite or tactical positions. The 50-50 blend with global stocks makes it a middle ground between “Peru only” and “global only,” useful for someone hedging emerging-market concentration risk without abandoning it entirely.