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Home > Investments > Investment Trusts

Landers cuts Brazil banks amid performance dip

BlackRock Latin America trust manager ditches Brazilian banks after poor performance.

By Rebecca Clancy | Published Jul 23, 2012 | comments

BlackRock’s Will Landers has slashed his exposure to Brazilian banks amid a poor reporting season for the companies.

The manager of the £209.5m BlackRock Latin American investment trust remains overweight in Brazil overall. The nation accounts for more than 60 per cent of the portfolio.

However, in the past few months he has “significantly” reduced his holdings in its banking sector – which has proved to be a detractor from the trust’s performance in the past year.

“Banks in Brazil have seen some disappointment of earnings,” he said.

One such holding that has been reduced is Itaú Unibanco, which has dropped from 8.5 per cent of the portfolio earlier in the year to 4 per cent last week – lower than in the fund’s benchmark index.

The manager has also trimmed his position in Banco do Brasil, although he has transferred some of these funds into Bradesco, a banking and financial services company in Brazil.

The move comes amid a wider dip in performance on the trust. In the year to July 16 it recorded a loss of 16.7

per cent, compared to its benchmark, the MSCI Emerging Markets Latin America index, which lost 12.6 per cent, according to Morningstar.

In June Mr Landers hired analyst Andrea Weinberg to the team, focusing on the commodity sector.

“The performance has not been brilliant so having a new person who has a re-energised voice is good for the team,” he said.

The team now has five analysts, with each covering 40 stocks compared to 50 before the appointment.

Elsewhere, the manager has also been playing the weakening of the dollar against the Brazilian currency, the real, in his portfolio.

“We like companies that have their revenues in dollars but their costs in real, because they benefit from the dollar’s weakness,” he said.

He has now positioned 6 per cent of the fund in stocks that may benefit from this theme. These include mining giant Vale, aircraft manufacturer Embraer and renewable energy company Cosan.

Economic growth in the world’s sixth-largest economy has started to slow, and Mr Landers said he was working on the assumption that Brazil would only see growth of 2 per cent this year.

This is in sharp contrast to 2010, when Brazil’s economy grew by 7.5 per cent.

This led Brazil’s central bank to cut its interest rate for the eighth time since August 2011 earlier this month, by 0.5 percentage points to 8 per cent.

“The problem [in Brazil’s growth] could have been bigger if they had not started cutting rates when they did,” he said.

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