Galápagos Capital announces the listing of EUAT11 on B3, an ETF that replicates the Vanguard Total Stock Market ETF (VTI) and gives Brazilian investors exposure to over 3,400 US companies of all market capitalizations. The fund carries an estimated total expense ratio of 0.18% per year, comprising a 0.15% management fee for the local B3 fund plus the 0.03% fee of the offshore ETF.
The US market beyond the top 500
EUAT11 differentiates itself from the most common US equity exposure in the Brazilian market, which is currently concentrated in products tracking the S&P 500. Rather than replicating only the largest corporations, the underlying benchmark tracks the US market in its entirety, incorporating mid, small, and micro-cap companies. In practice, investors stop buying a single slice of the market and buy the entire market instead. Through this structure, the product mitigates the concentration risk that characterizes traditional mega-cap indices.
Currently, VTI holds approximately 41% of its portfolio in technology companies, 12.50% in the industrial sector, and 10% in financials. The fund’s largest single holding is NVIDIA, representing 6.69% of the portfolio.
Cost as a core pillar of the thesis
Cost represents the second pillar of the thesis. VTI is the lowest-cost ETF in its category in the United States, with an expense ratio of just 0.03% per year, and stands as the fourth-largest ETF listed in the US market by assets under management. By accessing it through a domestic vehicle, Brazilian investors achieve a total fee of 0.18% per year without requiring an international brokerage account, foreign currency remittances, or offshore asset tax reporting.
Combination with GXUS11: a global portfolio at a ~0,25% p.a.
When combined with GXUS11, Galápagos’ proprietary global ex-US equity ETF, EUAT11 enables investors to build a global equity portfolio at an aggregate cost lower than existing global products available on B3. An allocation of 60% in EUAT11 and 40% in GXUS11 results in an estimated weighted average fee of approximately 0.25% per year.
A rapidly expanding market
The launch comes during a period of rapid expansion for the asset class in Brazil. B3 closed June with 204 listed ETFs, surpassing the 200-product mark for the first time, while total market assets under management rose from R$ 91 billion in December to R$ 126 billion, nearly double the amount recorded a year prior.
“Brazilian investors seeking US market exposure were actually just buying the 500 largest American companies. Those are two different things. EUAT11 delivers the entire market, including the small and mid-caps left out of the S&P 500, and does so at a cost that, until recently, was only accessible to those with offshore structures.”
— Bruno Stein, Head of Listed Funds at Galápagos Capital
