OBSR: Our top LatAm funds

OBSR analysts Sarah Bewley and Diego Higuera reveal the Latin American funds currently on their radar.

Latin America has historically been in the investment spotlight due to its past economic and political issues. Financial events such as the currency crises in Mexico, Brazil and Argentina have accompanied the development of the local markets during the past decades.

Governments have been encouraged to implement a series of monetary and fiscal reforms which have led their economies to grow at faster rates while maintaining healthy inflation levels.

Latin America represents a significant percent of global GDP and this number is expected to increase as the region continues to strengthen its domestic economy and foreign trade agreements. The continent has seen a positive change in terms of employment and social reforms which have stimulated, in some countries, a population move from poverty to the middle classes.

These economic improvements coupled with a significant regional transformation have increased confidence in a region that was once unattractive to foreign investors.

Onshore

Currently, OBSR does not have any Latin American funds rated in the onshore universe. Following the news of Julian Thompson’s departure as portfolio manager of the Threadneedle Latin American fund, and the move of Jeff Casson, former portfolio manager of the SWIP Latin American fund to Martin Currie, both funds were removed from the OBSR rating service. We will monitor these changes and continue to look for compelling opportunities in the space.

We recently had a meeting to discuss the Martin Currie Latin America fund, which was recently launched under the management of Jeff Casson. The strategy remains with the same investment philosophy as previously managed at SWIP. It continues to offer exposure to a high conviction and concentrated portfolio of companies listed or operating in the Latin American region. The investment process is based predominantly on picking companies rather than currencies, interest rates or country plays.

Offshore

Within the offshore universe however OBSR rates a number of Latin American funds.

The Gartmore Latin America fund is managed by Chris Palmer, who is supported by the Global Emerging Markets team. The fund offers investors exposure to all-cap portfolios of Latin American equities. The manager believes that a key driver of outperformance comes from identifying companies with positive growth outlook where unexpected earnings surprises may occur.

The team is driven by a bottom-up stock and sector selection approach, while adding top-down country considerations in the process. Given its strong focus on earnings, the fund is likely to benefit during markets where fundamentals are being recognised.

The BGF Latin American fund offers investors a core large-cap bias blended exposure to Latin America equities. Portfolio manager, Will Landers, is supported by three analysts with individual sector responsibilities. The investment process primarily involves bottom-up stock selection based upon fundamental research, and a top-down input in order to avoid macro economic induced setbacks and to take advantage of trends.

The manager is not index-driven and country weights can vary significantly from the benchmark, however, effective risk control is achieved through country and security diversification. Due to the nature of its process, the fund is likely to outperform its benchmark over the medium to long term.

HSBC Latin American fund is headed by London-based Jose Cuervo. He is assisted by portfolio manager, Natalia Kerkis, who co-ordinates the research from the strong team of analysts based in Sao Paulo. The fund offers investors exposure to a portfolio of large and mid-cap equities in Latin America. The predominantly bottom-up process is based on fundamental analysis that focuses on a company business model and its medium to long-term growth drivers.

Valuation analysis is a core element of the process as the team believes that long-term cash flow returns determine the direction of stock performance. Given its investment philosophy, the fund tends to outperform during bull markets and strong performance from mid-cap companies.

The Morgan Stanley Latin American fund offers investors core exposure to a large-cap blended portfolio of Latin American equities. The strategy is managed by a dedicated team of emerging markets professionals, led by Cristina Piedrahita, Scott Piper and Gaite Ali. The investment process combines a top-down country allocation with bottom-up stock selection, using an interactive team approach.

The managers typically favour growth orientated industries with a domestic focus. The fund seeks to outperform in rising markets over the medium to long term.
Patrice Lemonnier has run the Amundi Funds Latin America fund since its launch in 1994. Co-manager, Lionel Bernard, joined the group in 2000 and the Latin American team in 2005.

The strategy offers investors a core large-cap bias exposure to Latin American companies. The managers attempt to anticipate changes ahead of consensus, focusing on the difference between their views and those of the market. They are typically contrarian and thus looking to buy attractively valued stocks against the consensus on the view this will help boost returns and protect capital on the downside. The fund seeks to deliver reasonable outperformance across various market conditions helped by a focus on risk.