Latin America’s recovery is firmly underway as the region’s growth momentum is largely holding up across its various economies.
Regional giants like Argentina and Brazil have been leading the way, picking up steam as they emerge from deep recessions and carry out important market reforms.
Fellow market heavyweight Mexico stumbled in Q3 as high inflation and two earthquakes in September took its tool. However, robust external demand and healthy tourism revenues help prop up growth, according to a report from economic forecaster FocusEconomics.
Venezuela is the basket case of the region and with its economy in free fall and a lack of official data it is hard to know the extent of its recession. Added to that S&P’s declaration this week that it has defaulted on its debt and things will get worse before they get better.
The past year has seen many managers seize the opportunity to reap good returns from the Latin American equity market, with some managing to achieve a real turnaround in their performance after sitting near the lower end of this sector's manager rankings throughout 2016.
Of the 69 managers tracked by Citywire running a Latin American equity fund in 2017, we reveal the three that improved the most between the end of October 2016 and the end of October 2017.
Over this period the MSCI EM Latin America rose 10.5%
- Places gained: +37
- Fund: Neptune Latin America
- 1-year ranking (Oct. 17): 6/69
- 1-year returns: 16.7%
First up is Citywire A-rated Thomas Smith of UK shop Neptune. His UK-domiciled Ucits fund was launched in 2007 and Smith has been at the helm since 2011.
His largest sector allocation is toward financials at 41.3% with his top holdings including Banco Bradesco, Itaú Unibanco and Banco do Brasil. His next largest sector exposure is in materials.
Brazil accounts for over half his portfolio at 57.1%, followed by Mexico at 23.5% and then Chile with 7.5%. In a commentary at the end of September Smith said: ‘Looking across emerging markets, investors are crying out for reformist governments.
'In Asia we have seen this with India, and in Latin America Mexico, Argentina and now Peru have elected strong pro-market governments. Brazil is increasingly moving in that direction and Chile could see the re-election of Sebastian Pinera by the end of the year.’
2. Yosy Banach – LarrainVial Asset Management
- Places gained: +40
- Funds: LarrainVial AM – Small & Mid Cap Latin American Equity/LarrainVial Latinoamericano
- 1-year ranking (Oct. 17): 5/69
- 1-year returns: 18.32%
Within his small and mid-cap fund Banach has taken a different approach to Smith to drive returns, focusing over a third of his portfolio on consumer discretionary stocks. Financials also play a key role in his portfolio as they make up around a quarter of his investments.
Brazil once again dominates, accounting for over 60% of the fund followed by Mexico at around 25%. In his latest market commentary dating end of September, Banach and his team said: 'Macro and global politics have gone different ways lately. Global economic data is more positive: global growth rebounded, prices of raw materials improved since a year ago and global inflation is in reasonable ranges.
‘Politics has been a key issue with Macron's victory and Trump's weakening. Latin America seems to follow the same pattern. Regional growth seems to have hit the ground and decline in inflation in Brazil and Colombia suggests the outlook for the region is favorable.’
- Funds: Sura Acciones FMIV/Sura Mercados Integrados FMIV
- Places gained: +56
- 1-year ranking (Oct. 17): 4/69
- 1-year returns: 18.65%
Coming top of our most improved ranking in Latin America is José Block of Sura Asset Management in Peru. He runs two Peru-domiciled funds, the largest of which, Sura Acciones, invests in the Peruvian equity market.
His other fund, Mercados Emergentes, invests in the Peruvian, Chilean and Colombian market. Little information on their portfolios’ composition was available but Block has been running both funds since September 2015.