“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.”
In terms of the portfolio’s overweight to Peru, he notes the country’s market is quite small in the sense of the number of names available, and the overweight is driven by a large position in Credicorp, which at 4.7 per cent features in the fund’s top 10 holdings.
Mr Ortiz notes: “It is a big position for us and it plays a big part in the overweight. It is the biggest bank in Peru with a 70 per cent market share.”
Looking ahead the manager notes countries such as Mexico need to see earnings start to come through to help drive returns, while Brazil will be driven by re-ratings rather than earnings, although valuations remain reasonable. Meanwhile smaller economies such as Peru and Columbia should not have any reason to slow down, “on the contrary I think they will be economies where with oil prices coming down you will have a positive effect for both the consumer side and the internal economies.”
He concludes: “2015 will be a year of adjustment. So we will need patience, but also need to be ready for the market opportunities.”
EXPERT VIEW
Martin Bamford, chartered financial planner and managing director, Informed Choice
