Fund Profile

BlackRock Latin American 18 January 2023

Disclaimer

This is a non-independent marketing communication commissioned by BlackRock. 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

Latin America makes up only c. 9% of the MSCI Emerging Markets region, and so is unlikely to feature significantly in many investors’ portfolios. Yet the region has a number of key strengths that look well-suited to the current market environment, and which mean Sam Vecht and Christoph Brinkmann, the managers of BlackRock Latin America Investment Trust (LON:BRLA), believe the region could be set for a strong recovery at some point during 2023, well before the ponderous developed world.

The region is rich in natural resources, including the fossil fuels of crude oil and natural gas, the production of which has been limited in some parts of the world, creating favourable supply and demand dynamics. It is also a major source of copper and lithium, critical materials for the green energy revolution. With the removal of Russia from Western supply chains, the importance of Latin America in these markets has only increased. Sam and Christoph point out that politically Latin America has maintained trading relations with the West and its rivals in Russia and China, which brings economic benefits.

Additionally, the managers believe that the Brazilian central bank - Brazil makes up 61% of the region’s market capitalisation - is likely to be in a position to cut rates relatively early in 2023, having taken decisive action to raise rates to 14%, which has already led to inflation falling precipitously from its peak in the country. In their view, Latin America is likely to recover sooner than the developed world, potentially boosting equity returns.

BRLA is the only trust focussed exclusively on Latin American equities and pays a quarterly Dividend of 1.25% of the quarter-end NAV, equivalent to a yield of 5% on NAV (6% on the share price at the time of writing). After a strong 2022, this has been supplemented with a very large special dividend for 2022 of 13 cents, more than twice the annual payout, which reflects both an improvement in the revenue generated by the portfolio and the effects of the tender offer to reduce the share count.

Analyst's View

A clear indication of the conviction the BlackRock emerging markets teams have in Latin America is the fact their global funds have their largest overweight to the region for a decade. In Sam and Christoph’s view, the region is on the verge of a cyclical recovery, with various factors meaning the recessionary moment will be briefer than it will in the West. BRLA generated positive returns in 2022 thanks to the weakness of sterling, but, in our view, the supportive macro factors mean the region could be a relative bright spot again next year, this time in constant currency terms.

In our view, there are also interesting long-term trends which could support the region for some time to come. Chiefly, the trend to what has been called ‘deglobalisation’, but which might perhaps more properly be considered as a rewiring of the world economy involving the shifting of supply chains away from China and Russia, should increase the appeal of Latin America as a source of commodities and potentially as a locus for manufacturing. We note that China is increasingly important to the return path of the emerging market index and Latin America provides an effective hedge against an economic decoupling of the country from the West. Meanwhile, the importance of commodity producers to the Latin American equity market offers diversification to the technology and ecommerce stocks which sit at the top of the MSCI Emerging Markets Index.

Bull

  • High commodity prices benefit the portfolio and the region
  • Offers a 5% annualised yield on NAV
  • An experienced management team with deep resources to draw on

Bear

  • Energy and commodity markets can be economically sensitive which could bring high beta in a global recession
  • Latin American markets and politics can be extremely volatile
  • Any increase of gearing brings greater exposure to falling markets, as well as rising markets
Continue to Portfolio

Fund History

27 Mar 2024 Results analysis: BlackRock Latin American
BRLA outperformed its benchmark and even the S&P 500 in 2023…
10 Nov 2023 LATAM rate cuts and central bank gold buying
We take a look at some of the highlights of our BlackRock event…
03 Nov 2023 BlackRock Latin American
Chris Brinkmann
Rewatch this webinar which was part of our October and November online event 'The Best of BlackRock'...
Watch Recording
11 Oct 2023 Fund Analysis
Managers’ ambition to take more active positions has so far paid off…
20 Sep 2023 Five questions about emerging markets
We track key developments in the diverse emerging markets universe…
01 Sep 2023 The next chapter for Latin America
Newsflow around Latin America reflects a changing picture…
21 Apr 2023 Latin America: first out of the blocks?
Latin America has been resilient over the past 12 months, and could be early to recover when the inflation environment shifts, says Christoph Brinkmann, portfolio manager on the BlackRock Latin American Investment trust...
06 Apr 2023 Results analysis: BlackRock Latin American
BRLA’s managers argue Latin America is in a strong position for 2023…
08 Mar 2023 The next supercycle
Our research suggests a structrual tailwind could support the prospects for commodities throughout the next decade...
17 Feb 2023 Never miss an opportunity to miss an opportunity
Is it LATAM’s time to shine?
25 Jan 2023 The toad to recovery
Two of our analysts debate the outlook for China in 2023…
18 Jan 2023 Fund Analysis
Latin America looks set to recover first, according to the managers of BRLA…
24 Jun 2022 Delivering returns in a financial storm
We look at three trusts that have managed to deliver returns for shareholders so far in 2022…
01 Jun 2022 Are emerging markets doomed?
Bunching together different parts of the world leads to an unnuanced view of the opportunities in emerging markets…
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…
29 Apr 2022 O Canada
The North American market may act as a safe haven for investors in the near future…
27 Apr 2022 Finding value in a haystack
Non-income value strategies are becoming increasingly scarce, but the holdouts represent attractive near-term opportunities…
14 Apr 2022 Has the commodities ship sailed?
The commodities boom may be longer-lasting than you think…
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...
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...
22 Mar 2018 Fools rush in
The strong performance of emerging markets has seen investors flooding into ETFs, but the evidence shows that active managers produce far better results...
View all

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