The Latin American market shrugged off its loss-making habits to produce a stellar performance in 2016 despite many issues plaguing the region’s political and social scene.
In a comeback the likes of which even Madonna would be proud of, the MSCI EM Latin America index went from -30.8% in 2015 to +31.5% in 2016, a turnaround of over 60% percentage points.
While the end of the year proved more problematic for Mexico as Donald Trump’s victory put extreme pressure on its currency and stock market, the year has provided ample opportunities for Latin American equity managers to seize top value bets and reap the benefits.
Of the 73 managers tracked by Citywire in this sector, only ten managers managed to outperform the 31.5% of the index in 2016.
Below is a list of the top five performers over the past twelve months.
5. Alejandro Varela – Renta 4
- Fund: Renta 4 Latinoamerica
- 2016 returns: 35.23%
Kicking off our top five is Alejandro Varela, of Spanish investment group Renta 4. The Madrid-based manager has been running his Ucits fund since 2011 and invests predominantly in Latin American stocks trading on the FTSE Labitex benchmark, leading his fund to a 73% exposure towards the euro and helping him avoid local currency fluctuations.
Brazil is Varela’s largest country allocation at 40.5%, a considerable underweight to MSCI Latin America which allocates 57.9% to the country. This is followed by the US (24.4%) and Mexico (9.6%). His biggest sector exposures are financials (15.6%) and utilities and mining to the tune of 10.6% each.
4. Devan Kaloo – Aberdeen Asset Management
- Fund: Aberdeen Global - Latin American Equity
- 2016 returns: 35.69%
Returning to form in 2016 after a run of below par results over the past couple of years, Aberdeen’s head of emerging market equities Devan Kaloo breaks into the top four in Latin America. The fund, run by London-based Kaloo and his team since its inception in 2010, currently has around $560 million in assets under management.
Kaloo has taken a much larger bet than Varela on Brazil, allocating close to 60% of his fund on the Latin American giant. His next largest country exposure is Mexico at 20%, followed by Chile at 10.6%.
Financials is his biggest sector bet with Banco Bradesco and Itau Unibanco making up his top holdings.
3. Steven Gray – Eastspring Investments
- Fund: Eastspring Investments-Latin American Equity
- 2016 returns: 37.08%
A surprise inclusion in this ranking, Asia specialist Eastspring’s performance in Latin America has outdone many other global and regional peers. Fund manager Steven Gray has been running the fund since the summer of 2012.
In the same vein as Kaloo, Gray has also chosen to allocate 60% of his fund to Brazil, a slight overweight to the MSCI Latin America index’s 57.9% allocation. Once again Mexico comes second with 26.3% followed by Chile at 5.6%.
Financials tops his sector weights at 33.8% with consumer staples (14.7%) and materials (13.2%) next in line. Itau USA Investimentos and Itau Unibanco are his two top holdings, followed by Credicorp.
2. Warren Skillman – CIBC
- Fund: CIBC Latin American Class A
- 2016 returns: 40.96%
In second place is Warren Skillman of the Boston Company Asset Management, who manages the fund on behalf of CIBC. The Canada-domiciled fund was taken over by Skillman in 2012 and was initially launched in 1996.
Following the same pattern as our previous entries, Skillman allocates 59.9% to Brazil but his a higher allocation to Mexico at 29.2%, an overweight of almost 2.5 percentage points compared to the index.
Financials form the crux of his sector allocation at 31.5% with basic materials at 15% and consumer defensive stocks at 12.7%. His top holdings include America Movil, Itau Unibanco and Brazilian mining group Vale.
1. Juan Miguel Bakula – PromoInvest
- Fund: Promoinvest Incasol FMIV
- 2016 returns: 54.66%
Topping our list of the top Latin American equity managers of 2016 is Juan Miguel Bakula of Peruvian asset manager PromoInvest.
Focusing solely on the Peruvian stock market has paid off for Bakula’s Peru-domiciled fund as he has easily beaten his closest rivals to reap returns of almost 55% over the past 12 months.
His fund is denominated in Peru’s currency, nuevos soles, and invests no less than 75% of its fund in a portfolio of 20 companies listed on the INCA index.