Fund Review: Invesco Perpetual Latin American fund

This article is part of
Fund Review: Latin America

The £140m Invesco Perpetual Latin American fund is managed by Dean Newman with the aim of achieving long-term capital growth by investing in companies in this diverse region.

Mr Newman builds “the best blend of investments in the portfolio” by combining top-down analysis with bottom-up research, a process that has remained unchanged. He explains: “Macro research and our top-down analysis of markets play a key and crucial role in how we weight our portfolio and systematically evaluate our positioning across countries and sectors. Macro forces are often powerful and complex in Latin America, as well as in emerging markets, so we aim to take a consistent approach to evaluating them. On an ongoing basis, the team analyses the macroeconomic backdrop across the countries where we invest, seeks to understand the strength of the institutions in a country, and examines whether they are creating optimal incentives for economic development and business investment.”

Mr Newman and his team frequently conduct research trips to Latin America, where top-down meetings with leading economists, central bankers, market strategists and industry regulators feature alongside company meetings. He ensures the portfolio’s positioning at a country, sector and subsector level reflect where his conviction lies from a macro point of view.

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According to the key investor information document, this fund sits at the riskier end of the risk reward scale – level six out of seven – while ongoing charges of 1.75 per cent apply to the clean fee accumulation share class.

The fund’s performance has suffered in the past year and also over longer time periods.

FE Analytics data shows in the 10 years to March 22 2016 the fund returned 25 per cent to investors. The MSCI Emerging Markets Latin America index gained 38.4 per cent over the same period.

More recently, the fund’s performance has been in negative territory, at -8.2 per cent in the year to March 22 2016, while the index was down 7.1 per cent and the IA Specialist sector delivered an average negative return of 4.7 per cent.

The region has been politically and economically turbulent, prompting the manager to increase the portfolio’s exposure to Mexico but trim back on Brazil. “We believe the Mexican economy is doing well, drawing support from healthy macro fundamentals, such as benign inflation and low interest rates. Mexican consumers continue to benefit from a strong labour market and the country’s manufacturing sector remains a success. By contrast, Brazil is going through a tough time as the economy grapples with recession and political woes.”

EXPERT VIEW - Ben Willis, head of research and investment manager, Whitechurch Securities
Dean Newman is a highly experienced manager in this area and has been running this fund for more than 20 years. However, the numbers have been average over the medium term and, to be frank, even worse over the long term. This is a problem; if Mr Newman struggles to outperform then you might as well opt for a passive approach. To justify the fund fees for active management, then you have to show something different and generate alpha, which has not been achieved, unfortunately.