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Who are the best Latin America managers?
by Robert St George on May 20, 2014 at 14:12
Citywire Discovery turns to the Latin American equity sector
The majority of the managers shown on the chart above are focused solely on Latin America. Just two of them also run broader emerging-market funds. They sit in opposite corners of the graph.
In the top right, denoting strong performances over both seven and three-year time periods, is Dean Newman of Invesco. In the bottom left, indicating the opposite, is Mark Mobius of Franklin Templeton.
Mobius, as everyone knows, dabbles in everything: he runs 11 open-ended funds in the UK, spanning the world from Latin America to China via Africa and Eastern Europe. Citywire A-rated Newman has a finger in just two pies: Latin America and a generalist emerging-market vehicle.
How has this influenced their portfolios?
The analysis comes from Citywire Discovery, a new desktop system that allows fund buyers and fund groups to access track records of over 9,000 managers tracked by Citywire. It provides unique insights into peer group analysis, performance comparisons and competitor analysis. For more details contact email@example.com
It would be fair to presume that Latin America occupies less of Mobius’s time. This is underlined by the fact that Newman’s product – which is larger than Mobius’s – is actually the more specialist one. Mobius (pictured) is responsible for around £30 billion through his various strategies within the Templeton Emerging Markets group, with Templeton Latin America accounting for just the one billion.
Yet Newman has nonetheless resisted the temptation to stuff his wider portfolio with Latin American stocks: he has just 9.1% of Emerging Countries in Brazil and a further 2.7% in Mexico. Mobius has allocated 15.1% to Brazil alone through Templeton Global Emerging Markets.
Brazil is the greatest weighting in both of their Latin American portfolios too, although Newman is overweight the country while Mobius is under. The local giant represents 57% of the MSCI Emerging Markets Latin America index, but 55% of Mobius’s fund and 60% of Newman’s.
Mexico is the other heavyweight in the index at 27%. Newman is close to that at 24%, but Mobius has shunned it and invested a mere 10% of his portfolio there. Yet despite his more bullish positioning Newman is still cautious: for him, in Mexico ‘stock valuations are too high for the anticipated levels of companies’ earnings growth that is available’. Mobius also manages his fund according to a value style, explaining his Mexican standoffishness.
The two managers are more aligned when it comes to sectors. For both, the greatest weights are to financials, materials and then the consumer – in line with the benchmark.
A final point of consensus is that the pair have built fairly concentrated portfolios: with 143 constituents in the index, Mobius holds 35 and Newman 53.
Will Landers, BlackRock
Will Landers tops the seven-year rankings through the combination of his straightforward Latin American fund, launched in 1997, and his smaller-cap Latin American Opportunities, which appeared 10 years later.
It is the small-cap strategy that has propelled performance in this case. The larger £1.5 billion Latin American fund, for example, is bottom of the league table on a three-year view with a loss of 31%. The £72 million Latin American Opportunities fund, meanwhile, has turned in a top-quartile return for the period, losing 20%.
The fact that a fund can lose a fifth of its capital in three years and still be considered first quartile is indicative of what a difficult period it has been for Latin American equities. For comparison, the MSCI Emerging Markets Latin America index has dropped 27% through the same time.
Landers’s greatest divergence from the benchmark at the moment is to be underweight Chile, with no exposure at all to the country through Latin American Opportunities against an 8% index weight. He is otherwise broadly in line with the benchmark on Brazil and Mexico.
Three-year total return: -15.6%
Ian Simmons, Charlemagne
Simmons notes the way short-term sentiment about the direction of politics in the region has been influencing stock markets of late, typically more so than company or even country fundamentals.
Brazil, for instance, has outperformed so far this year, rebounding 7.5% while the wider regional index is up only 3%. Simmons views this as a response to polls indicating waning support for incumbent president Dilma Rousseff ahead of October’s elections.
‘The current administration is widely perceived in financial markets as having mismanaged the economy with its interventionist approach and predilection for micromanagement attracting widespread criticism,’ Simmons explained.
So as the chances increase that Rousseff will be turfed out, state-controlled enterprises such as Petrobras, Banco do Brasil and Eletrobras have rallied despite wider fears, including an S&P credit downgrade and ongoing threats of power rationing.
Mexico, in contrast, has struggled on a relative basis, with Simmons blaming investor impatience for further evidence of the government’s reform agenda to materialise even though the country’s medium-term outlook is superior to that of Brazil.
Three-year total return: -13.8%
Luis Carrillo, JP Morgan
Brazil star Sebastian Luparia recently took on a broader emerging-markets role at JP Morgan, meaning he stepped down from the firm’s Brazil Equity fund, on which he was a Citywire AA-rated manager.
He was replaced on that £165 million vehicle by Sophie Bosch de Hood, who is also Carrillo’s co-manager on Latin America Equity. Bosch de Hood, like Luparia, is a Brazil specialist with 14 years of investment experience. Carrillo himself is more focused on Mexico.
Despite the many differences between Brazil and Mexico – language being but one – very few other funds in the sector have taken this team approach, with responsibilities naturally divided by country specialism.
Three-year total return: -14.6%
Jeff Casson, Martin Currie
His fund is surely at risk of closure given its near uneconomic size of just £3 million and weak performance numbers. The fund has lagged the index since its launch in 2010, and is below the sector average over both one and three years.
To stand a chance of survival, Casson will have to post some stellar returns soon or substantially differentiate his fund from what is a fairly homogenous peer group.
On the first point, Casson’s numbers are at least now above average on one and three-month views, although they are not yet top quartile.
And on the second, Casson is more or less in line with the index by sector and country: Brazil, Mexico and financials dominate; he is underweight Chile and Colombia and overweight materials, but not by enough to shape performance dramatically.
The fund has made some punchier bets at the individual stock level, but even that is undermined by the appearance of the iShares Latin American 40 exchange-traded fund in Casson’s top 10 holdings.
Three-year total return: -16.3%
More about this:
Look up the funds
- Templeton Latin America A (Ydis) GBP
- Invesco Perpetual Emerging Countries Acc
- Invesco Perpetual Latin American Acc
- BGF Latin American A2 GBP
- BSF Latin American Opportunities A2 GBP
- Charlemagne Magna Latin American C GBP Acc
- JPM Latin America Equity A Acc USD
- Martin Currie Latin America A Acc
- Templeton Latin America A (Ydis) USD
- BGF Latin American A2 USD
- BSF Latin American Opportunities A2 EUR
- Charlemagne Magna Latin American A EUR
- JPM Latin America Equity A Dis USD