Latin America has gown strongly over the past decade, but now investors may need to be more selective

by Ian Cowie

The Telegraph

Saturday 15 September 2012

Not so long ago, City wags used to say that you needed to be nuts to invest in Brazil. But now Latin American funds dominate the best-performing unit trusts over the past decade.

According to independent statisticians Morningstar, this continent was the location for no fewer than eight of the top 10 funds since 2002. Invesco Perpetual Latin America led the way, turning £100 invested in September 2002 into £655 now. Henderson Gartmore and Fidelity's LatAm funds were not far behind, delivering total returns of £630 and £611 respectively over the decade.

To put those figures in perspective Morningstar calculates that £100 invested in the FTSE 100 index of Britain's biggest companies over the same period would be worth just £103 today, including reinvested dividends.

But the past is not necessarily a guide to the future and a trend is only a trend until it stops. Economic development means Latin America is neither the basket case nor the bargain it used to be. Demand for hard and soft commodities in which countries such as Brazil are rich has fallen as a result of the global credit crisis and experts are divided about what the future holds. .............................

....... Alan Steel of Alan Steel Asset Management argued that Latin American shares and funds have had too good a run for now to be the right time to buy. He said: "While I agree about the outperformance Latin America has delivered for a long time, investor sentiment evidence is not positive right now for higher allocation to the area.

"So I'd not be a buyer of Latin American trusts today. Maybe in a few months. But for more diversified emerging market exposure I would select First State Global Emerging Markets because its manager, Jonathan Asante, has proved for a decade now that he is excellent at calling where to invest and where not. I'd prefer him to make his call on Latin America and when it's time to tango."

No wonder cynics claim that Brazil is the country of tomorrow. But economic development and stock market increases achieved over the past decade demonstrate that real progress is being made. Sooner or later, it makes sense to consider having some exposure to that growth potential.

Quote courtesy of The Telegraph

Saturday 15 August 2012