Fund flows into the region have largely mirrored the fortunes of equity indices.
Data from Morningstar show net outflows of £13.2bn from Latin American equities for the 10 years to the end of 2017. The bulk of the outflows were between 2011 and 2016.
In terms of fund performance, Table 1 shows the performance of Investment Association-listed Latin American equity funds over the past 10 years. The Neptune Latin America fund is the top performing fund over 10 years to September 30 2018, returning 44.9 per cent compared with an average of 8.7 per cent for its peers.
On the flip side, the Templeton Latin America fund is the worst performer over the past decade, falling by 12.1 per cent. It has suffered more over the short term than its peers, falling 13.3 per cent in the 12 months to September 30, compared with an average of -10.9 per cent for the funds in the table and -6.6 per cent for the top performing Neptune fund.
Drivers for the future
Michael Wang, a fund manager within the global emerging markets and Asia team at Polar Capital, says the drivers of equity performance in Latin America were previously tuned into global growth, but this has gradually shifted towards domestic demand.
“Latin America, particularly Brazil, enjoys a young population and a rising middle class,” Mr Wang says. “These demographic changes generate an internal driver of demand for many consumer products and services such as banking, internet connectivity and health care.”
Much of the region still needs large investments in infrastructure, Mr Wang says, and domestic demand is expected to be an increasing driver of returns in the future.
Nevertheless, with the region’s fortunes so heavily influenced by commodity prices and US trade policy, investors should not expect smooth sailing by any stretch of the imagination.
Geordie Clarke is a freelance journalist
