BlackRock Latin American 10 December 2020
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.
To secure long-term capital growth and an attractive total return, primarily through investing in quoted securities in Latin America.
BlackRock Latin American Investment Trust
Edward M. Kuczma & Sam Vecht
Association of Investment Companies (AIC) Sector
Dividend Distribution Frequency
Four times a year
Latest Market Capitalisation
Latest Net Gearing (Cum Fair)
Latest Ongoing Charge ex Perf Fee
(Discount)/Premium (Cum Fair)
Daily Closing Price
BlackRock Latin American Investment Trust (BRLA) is managed by Ed Kuczma and Sam Vecht, who aim to generate long-term capital growth by investing in Latin American equities. Although the investment process focusses on growth, BRLA pays a dividend of 1.25% of NAV each quarter – 5% annualised – from capital where necessary.
Ed and Sam took over in January 2019. They have overhauled the portfolio, increasing the concentration and the exposure to small caps and off-benchmark positions. The result is a much more active proposition which showed outperformance potential before the coronavirus pandemic hit Latin America hard.
Latin America has historically displayed a high beta to global markets in downturns and recoveries, as we discuss in the Performance section. Having been one of the hardest-hit markets during the initial crisis, as news of potential vaccines has emerged this winter the region has rallied hard too. Ed and Sam have increased the gearing thanks to what they view as an exciting value opportunity.
Latin American markets are dominated by traditional value areas – banks, miners and oil & gas companies. However, as we discuss in the Portfolio section, BRLA has also built up exposure to the newer online economy.
BRLA is the only sizeable Latin America equity specialist investment trust, with the other trust investing in the region having less than £40m in net assets. BRLA benefits from the advantages of closed-ended funds; such as the ability to gear and not having to sell into falling markets. BRLA trades on a discount of 8.4% at the time of writing.
Latin America is a region which it is easy to overlook. It only makes up 8% of the MSCI Emerging Markets Index, meaning that investors are unlikely to have much exposure. However, we think it offers exciting potential in strong global economic recoveries, which is one potential outcome of the current race to approve vaccines for COVID-19. The region’s markets typically display a high beta to global markets, and the high weight to the cyclical sector of banks, materials and energy could offer strong performance potential if a recovery takes hold next year.
BRLA is the only pure equity investment trust investing in the region. The other trust, Aberdeen Latin American Income Fund, invests in bonds and equities and is too small for professional investors (with a sub-£40m market cap). BRLA is therefore the largest and most liquid trust offering access to the region's equity markets and has the distinctive, performance-boosting strengths of closed-ended funds: it has taken on gearing and trades on a discount to NAV.
Since taking over, Ed and Sam have created a much more active portfolio which offers good outperformance potential. We saw that start to come through before the unexpected hit to markets from the pandemic. As well as offering market beta, BRLA now offers access to small-cap and off-benchmark stocks otherwise hard to invest in and which often play on themes of e-commerce and internet connectivity (which the region is not normally known for).
|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