Introduction to the Strategy

The iShares MSCI Peru and Global Exposure ETF (EPU) is an exchange-traded fund designed to provide investors with exposure to Peruvian equities through the MSCI All Peru Capped Index. The fund offers access to one of Latin America's resource-rich economies and serves as a vehicle for investors seeking participation in Peru's mining, financial services, utilities, and consumer sectors. As a traditional unleveraged ETF, EPU is designed for investors pursuing long-term exposure to Peru's economic growth and the structural demand for critical commodities.

Peru is one of the world's largest producers of copper, silver, zinc, and gold, making its economy highly integrated with global commodity markets. Increasing investments in electrification, renewable energy, electric vehicles, and infrastructure development have strengthened the long-term outlook for industrial metals, particularly copper. As global demand for critical minerals continues to expand, Peruvian companies remain positioned to benefit from favorable commodity cycles and rising infrastructure spending worldwide.

How EPU Works: The Mechanics of a Country-Focused ETF

EPU seeks to replicate the performance of the MSCI All Peru Capped Index by investing in a diversified portfolio of Peruvian companies. The fund provides investors with exposure to multiple sectors, although mining and financial institutions typically account for a substantial portion of the portfolio due to the structure of Peru's equity market.

Unlike leveraged ETFs, EPU does not employ leverage or daily reset mechanisms. Consequently, returns are intended to closely track the underlying index over time, making the ETF suitable for strategic asset allocation and long-term investment objectives.

Underlying Exposure and Investment Drivers

EPU provides exposure to leading Peruvian companies operating across mining, banking, utilities, industrials, and consumer-related businesses. The fund's performance is heavily influenced by global prices of copper, gold, silver, and other base metals, as well as domestic economic activity and financial sector conditions.

In addition, factors such as Chinese industrial demand, global infrastructure investment, interest rates, exchange rate movements, and capital flows into emerging markets can materially affect the earnings outlook of constituent companies. Government policies, mining regulations, and political developments within Peru also play an important role in shaping investor sentiment and overall market performance.

Who Is This Fund For?

EPU is primarily suited to investors seeking long-term exposure to Peru's economy and the structural growth opportunities associated with critical minerals and emerging markets. The fund may appeal to investors looking to diversify geographically while gaining participation in the long-term demand for copper and precious metals without investing directly in individual mining companies.

Given its unleveraged structure and diversified exposure, EPU may be appropriate for growth-oriented investors and those seeking additional emerging-market diversification. However, investors should remain aware of country-specific, political, and commodity-related risks associated with the Peruvian market.

Key Risks and Drawbacks

• Commodity Price Dependence: Peru's equity market is heavily influenced by fluctuations in copper, gold, silver, and other metal prices, increasing earnings volatility across key holdings.
• Political and Regulatory Risk: Changes in government policies, taxation, environmental regulations, or mining concessions could adversely affect business conditions and investor sentiment.
• Emerging Market Risk: Peru remains exposed to currency volatility, capital outflows, and shifts in global risk appetite that may contribute to elevated market fluctuations.
• Sector Concentration: Mining and financial companies account for a significant portion of the portfolio, limiting diversification relative to broader international equity funds.
• Sensitivity to Global Economic Conditions: Demand from China and broader industrial activity significantly influence commodity markets and, consequently, the performance of Peruvian equities.

Price Chart Technical Summary

Conclusion

The iShares MSCI Peru and Global Exposure ETF (EPU) offers investors an efficient vehicle for accessing one of Latin America's most resource-rich economies and participating in long-term trends supporting industrial metals and infrastructure development. Supported by Peru's strong position in copper and precious metals production, the country's long-term growth prospects remain closely tied to global electrification and commodity demand. Nevertheless, investors should recognize that commodity cycles, political developments, and emerging market volatility can contribute to periods of heightened uncertainty, making disciplined portfolio construction and appropriate risk management essential.