Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Latin American. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

BlackRock Latin American (BRLA) invests in Latin America for capital growth, using the full extent of BlackRock’s resources as the world’s largest money manager to generate alpha from stock selection and proprietary macroeconomic analysis.

Since 2018, BRLA has also paid a quarterly dividend set at 1.25% of NAV, equivalent to 5% at a constant NAV. The board can pay this out of capital where necessary, which means the managers can continue to focus on the best growth prospects without having to sacrifice growth for yield.

Managers Ed Kuczma and Sam Vecht took over in January 2019. Their aim has been to make the portfolio more active, with individual stock picks more important to performance. As we discuss in the Performance section, this has generally been successful, although the region has been rocked by two major crises during the managers’ tenure.

The MSCI EM Latin America benchmark is dominated by Brazil (c. 61%) and Mexico (c. 24%), and BRLA’s portfolio is similarly weighted. The region’s markets were among the worst hit by the coronavirus pandemic with a c. 45% peak-to-trough fall. The index is now trading on extremely low P/E levels and BRLA is on a 10.3% discount (see the Discount section).

The only two other closed-ended funds investing in Latin America are arguably sub-scale (with net assets well below £50m). As a result, their charges are double BRLA’s. With open-ended funds also rare, BRLA is one of the few options for exposure to the region, and benefits from the advantages of closed-ended funds such as the ability to gear and not having to sell into falling markets.

Kepler View

In US-dollar terms, the Brazilian stock market is at a similar value to what it was in 2005, despite the huge advances the economy has made since then. In our view this is anomalous, and the market could be an intriguing long-term investment. There are also some headwinds: the high exposure of the market to energy, materials and financials means it is cyclical, exposed to the global economy and biased to value. However, all this means that it could be a strong performer in any recovery from the global pandemic crisis – just as it was one of the hardest hit entering the crisis.

BRLA is a highly attractive way to access this opportunity. Its closed-ended peers look sub-scale after the vicious drawdowns of recent weeks, and BRLA is now extremely cheap by comparison. Furthermore, it offers an attractive yield from a region to which few investors will have any exposure (we note that the region is less than 10% of the MSCI Emerging Markets Index, so few investors will have exposure through their EM funds).

Finally, the experienced management team and deep resources of BlackRock have the potential to be a potent combination. We note that the trust has become demonstrably more active under Ed and Sam, with strong evidence they can add alpha against the benchmark – even if that has been derailed in the short term by unpredictable crises.

bull bear
The trust is on a wide discount and the market is extremely cheap The fallout from the coronavirus pandemic is unpredictable in the short term
A 1.25% quarterly dividend Latin American markets can be extremely volatile
An experienced management team with deep resources to draw on Any increase of gearing brings greater exposure to falling markets as well as rising markets
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2022 Kepler Income & Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for income & growth... Find out more

Fund History

11 May 2022 Fund Analysis
The Latin American region seems to be in a sweet spot, benefitting from high commodity prices…
04 May 2022 Time to change the record
We ask whether equities can still offer meaningful diversification or whether investors need to turn to alternatives…
27 Apr 2022 Finding value in a haystack
Non-income value strategies are becoming increasingly scarce, but the holdouts represent attractive near-term opportunities…
11 Apr 2022 Results analysis: BlackRock Latin American
BRLA was the top-performing investment trust in Q1 2022…
25 Mar 2022 Slides and Audio: BlackRock Latin American
Download the presentation and listen to the audio from our 'Ideas for your ISA' virtual Spring event on 15 March...
23 Mar 2022 Fifteen ideas for your ISA
Slides and audio from our event last week, featuring fund managers running money in every major market in the world...
17 Mar 2022 It's the end of the world as we know it
We examine five potential themes for investors seeking long-term returns in a troubled and uncertain world...
23 Feb 2022 Regime change
Ahead of our spring conference, we ask whether investors need to junk their portfolios and start again…
13 Oct 2021 Beyond the Middle Kingdom
As momentum falters in the emerging markets powerhouse, we examine the options for investors outside China...
29 Sep 2021 Slings and arrows
Our analysts argue over whether it’s better to take arms against volatility in a portfolio, or to simply suffer it…
28 Sep 2021 Fund Analysis
BRLA offers an annualised yield of 5% from a region which should benefit from a global recovery…
01 Sep 2021 Winter is coming
Summer was a welcome opportunity for exhausted investors to turn their backs on the legion threats they face, but they haven't gone away and the days grow short - we examine four in detail...
30 Jun 2021 Inflation – a real threat or hot air?
Two of our analysts ask whether recent high inflation numbers indicate something long-lasting and troubling is happening…
05 May 2021 Vive la revolution
For thirty years quality has had a structural tailwind; but revolt is in the air and value is on the barricades…
28 Apr 2021 Latin America and the commodities supercycle
Commodity prices have been rising fast. Ed Kuczma, Co-Manager of the BlackRock Latin American Investment Trust plc, says Latin America should be a key beneficiary and he is positioning for a long-term trend.
06 Apr 2021 Results analysis: BlackRock Latin American
We look at how BRLA has performed, and what 2021 might have in store for the trust…
24 Mar 2021 Shoot to Thrill: ISA targets for long term growth
We all intend to invest for the long-term but can often be distracted by the news...
16 Mar 2021 Fund Analysis
The managers of BRLA are highly bullish on their region’s prospects in a global recovery from the pandemic…
11 Mar 2021 Slides and Audio: BlackRock Latin American
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 02 March...
10 Mar 2021 Spring Conference '21
Audio and presentations from 21 of the UK’s leading investment trust managers…
10 Dec 2020 Fund Analysis
BRLA invests in Latin America, which has historically seen strong returns in global recovery periods…
09 Dec 2020 A bumper harvest?
Agricultural and industrial commodities have rallied strongly, but what are the implications for emerging market allocations...?
13 Aug 2020 Underground bangers
We look for hidden gems in the smaller end of the investment trust universe...
12 May 2020 Fund Analysis
BRLA invests in Latin America, where valuations could indicate a generational buying opportunity…
06 May 2020 Latin America: discovering new growth
Latin American markets have been hit hard by the coronavirus outbreak. However, says Ed Kuczma, Co-Manager of the BlackRock Latin American Investment Trust plc, there may be opportunities amid the gloom...
01 Apr 2020 Back in Brazil
As global markets have suffered in 2020, Brazilian stocks have been no exception. Could this be a good time to consider buying?
16 Jan 2020 Drifting apart: how emerging markets have become less correlated
We examine how correlations between different emerging markets have evolved, and whether single country strategies could diversify returns going forward....
10 Dec 2019 Fund Analysis
BRLA has raised its gearing in anticipation of a Brazilian market rally...
07 Oct 2019 Is a Brazilian breakthrough on the horizon?
Brazil's currency often upsets assumed norms, and current signs offer the possibility another twist is coming...
04 Sep 2019 Time to pay attention to Latin America?
07 May 2019 Fund Analysis
The trust's high profile new managers are bullish on the outlook, particularly for Brazil, and the discount has narrowed sharply...
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