Barings Mike Simpson cuts exposure to Brazil
Mr Simpson, head of Latin American equities, officially took over the running of the Dublin-domiciled $663m (£410.4m) Baring Latin America fund in January, after joining the group in October last year.
The manager said he is looking to make the portfolio more concentrated by taking it down to 40-45 names from the 53 that currently make up the fund.
Mr Simpson has reduced Brazil to 56 per cent compared with a 63 per cent weighting in his benchmark MSCI Emerging Markets Latin America index.
He has no exposure to telcos in the country and is not adding to defensive sectors, such as consumer staples, which he called “expensive”. Mr Simpson has also reduced his exposure to banking.
“We realised that the Brazilian government wanted to devalue its currency, the real, and so as a dollar-based investor we became more cautious on Brazil,” he said.
“Furthermore, it seems there is going to be some intervention in the banking system by the government.”
However, the manager said he is overweight the consumer in Brazil and last month added a position to education company Anhanguera Educacional.
Elsewhere, the fund has moved overweight Chile, which now represents 8.5 per cent of the fund.
The manager said he is using stocks in Chile to gain exposure to Peru and Columbia, including department store company Falabella, which now represents 2 per cent of the fund.
“Those two markets [Peru and Columbia] are difficult to access directly, as the daily trading activity on the market is less than $1m, but some of the retailers in Chile have half of their growth coming from Peru and Columbia,” he said.
Mr Simpson has upped his exposure to Mexico, increasing his position to 23 per cent from 21.8 per cent after the manager invested in silver and gold producer Fresnillo. Meanwhile Colombia, which “would have been considered uninvestable six years ago”, is also a potential investment opportunity for the manager because of its “energy boom”.
“People were concerned about its trade ties with Venezuela, which was its largest export market,” he said.
“But now it exports little there and in the past five years it has witnessed an energy boom, which in terms of GDP percentage is much more significant than Brazil.”