Investments  

Fund Review: Fidelity Latin America

This article is part of
Fund Review: Latin America

Launched in 1994 this £807m Fidelity Latin America fund has been managed by Angel Ortiz since 2009, with the manager adopting a fundamental bottom-up stockpicking approach.

The team, led by manager Angel Ortiz, seeks out companies with growth prospects at reasonable valuations, with a focus on market leaders and companies with strong balance sheets, with at least 70 per cent of the portfolio invested in shares of Latin American companies.

The Luxembourg-domiciled Sicav has a relatively concentrated portfolio with approximately 56 holdings and is benchmarked against the MSCI Emerging Markets Latin America index capped 5 per cent, with the manager currently overweight Peru, Columbia and Argentina, at the expense of Brazil, Mexico and Chile.

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Mr Ortiz notes that the methodology and the process for the fund has remained the same since he took over the strategy more than five years ago. The team target specific things within different sectors, such as market leaders within the consumer sector, disciplined management within the financials area, companies with sustainable dividends and those that are potential merger and acquisition targets.

He explains: “I’m trying to be as defensive as possible, while also looking for companies that can grow. It is easy to become nervous but there will be companies that will come out of this crisis stronger, and they are the ones I want to hold in the portfolio.”

The portfolio has a synthetic risk reward indicator rating of six out of seven, according to it key investor information document, while the ongoing charges for the fund are 1.95 per cent.

The fund has delivered a positive performance for the five years to November 6, with a return of 1.01 per cent, according to FE Analytics. The fund, which sits in the IMA Specialist sector, has delivered positive returns in four of the past seven years, since the launch of the sterling A share class in June 2006.

Meanwhile the MSCI Emerging Markets Latin America index, used for comparison purposes only, has delivered a disappointing loss of 7.75 per cent in the same five year period.

The two main markets in the region are Chile and Brazil, both of which have had election and political challenges this year.

The manager notes: “Expectations are low and there is room for further reduction of those expectations, but at the same time in this environment the best opportunities are created and we have to be ready to take advantage of that as they don’t come very often.

“I normally look for companies that grow at a reasonable valuation, in the last year to nine months, in fact from March onwards, clearly what happened is the first election poll [in Brazil] came in with the outlook that the incumbent will remain, but that the discontent was really big and that opened the door for possible change.

“As a result of that the Brazilian market re-rated quite significantly, that re-rating was driven by companies with government intervention, such as Petrobras and Banco do Brasil,. What I decided was that rather than follow the sentiment I wanted to focus on the fundamentals and for me none of them deserved to be in the portfolio. That clearly had an effect on the portfolio in the last six months, but now the election has passed and the market has come back to fundamentals I am on the other side of that. I will remain with fundamental approach rather than speculation approach.”