Investments  

Product Review: BRAM targets UK investors with new $100m Lat Am fixed income fund

It is BRAM’s first Latin American fixed income fund and is targeting family offices, private banking clients and institutional investors across Europe.

The Latin American Hard Currency Bond Fund is the latest addition to another five Ucits structured funds within its European offering.

It aims to grow the latest fund to $100m (£59m) by selling to investors in the UK, France, Spain, Portugal, Italy and Switzerland.

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The fund will be 50 per cent or more weighted to Brazil, with up to a third from Mexico and the rest divided between Chile, Colombia and Peru.

That initial plan may change with new market opportunities in developing countries.

“The goal is to offer investors an average credit risk that is inferior to that of a typical high yield bond fund but with a similar expected return,” said Clayton Rodrigues, senior portfolio manager at BRAM.

The launch of the fund comes at a time when BRAM is expanding its business geographically and widening its assets to a broader base of investors by offering new products covering regional, global and specific country markets.

European investors as well as Latin American and Asian investors buy into Bram’s Ucits Sicav funds.

Recent research by Consensus Economics showed Brazil was one of the biggest losers in terms of 2014 growth forecasts.

Brazil has had to raise interest rates sharply to contain inflation, and is unlikely to beat its 2013 growth of 2.3 per cent. Mexico, although less commodity-driven than South America, is unlikely to do much better.

Emerging markets have cooled generally since the latter half of last year, led by falls in confidence in Latin America.

But Mexico will benefit from a broader section of the American economy growing next year, according to Barings’ Mike Simpson.

BRAM’s other funds domiciled in Luxembourg include the Brazilian Equities Mid-Small Caps Fund and the Brazilian Hard Currency Bond Fund, which targets Brazilian bonds.

Parent company Banco Bradesco established its asset management arm more than 40 years ago, before separating the business and naming it Bradesco Asset Management in 2001.

Reactions:

Provider view

Joaquim Levy, chief executive of BRAM, said: “Latin America can offer diversification and attractive yields with low credit risk.

“This fund seeks to maximize medium-term returns by investing primarily in Latin American investment-grade corporate and sovereign bonds issued in dollars. The investment approach is based on robust credit research, market and macro monitoring, and duration analysis.”

Adviser view

Darius McDermott (pictured below), managing director at Chelsea Financial Services, said: “They are clearly a regional specialist, so that is a positive and it could be a good diversifier. It is all about risk and reward. This is riskier than a high yield credit fund.”

Charges

Class R: 1.35% (minimum investment US$5,000)

Class R: 1.35% (minimum investment €1,000)

Class I: 0.75% (minimum investment US$1m)

Verdict

“With Latin American debt we would probably favour Mexico over Brazil, because if US GDP is stronger, then it is also Mexico that benefits. A chunk is coming from the energy boom, most from Texas. And where is Texas? Right next to Mexico.”