Emerging Markets 

Guide to investing in Latin America

  • Be able to list what the long-term opportunities are for investing in the region.
  • Identify how Latin American equities have performed recently and over the longer term.
  • List the reasons Latin American bonds have outperformed and what political changes the region might face.
CPD
Approx.60min
Guide to investing in Latin America

Introduction

Latin American politics has been dominating headlines recently, so UK investors in the region may have been distracted by some of the political and economic noise.

Andrey Kuznetsov, portfolio manager at Hermes Investment Management, admits: "Voter anger over corruption has also shaped recent elections in other Latin American countries."

But there is more to the region than its politics - Latin American fixed income markets have been performing well, even if its equity markets have not.

"Latin American credit has outperformed all other emerging market (EM) regions – in terms of total return – for the past three years," Mr Kuznetsov points out.

The presidential election in Brazil saw the country's population elect far right politician Jair Bolsonaro. 

But Conrad Saldanha, senior portfolio manager, emerging markets equity and Gorky Urquieta, global co-head of emerging markets debt at Neuberger Berman, suggest there may not be as much to worry about as investors think, explaining: "[Mr] Bolsonaro, with his authoritarian instincts and controversial statements, is part of a global wave of conservative populism.

"However, while his campaign has been vague on the economy and he has voted against reforms in the past, his recent tone has been anything but populist."

This guide to investing in the region, which is worth an indicative 60 minutes of CPD, looks at the long-term prospects for investors and why this year has been a tough one for Latin American equities.

It also considers how political change might shape Latin America in the years to come and the drivers behind the solid performance of its bond markets in recent years.

Contributors to this guide: Andrey Kuznetsov, portfolio manager at Hermes Investment Management; Conrad Saldanha, senior portfolio manager, emerging markets equity and Gorky Urquieta, global co-head of emerging markets debt at Neuberger Berman; Aneeka Gupta, associate director for research at WisdomTree; Xavier Hovasse, manager of the Carmignac Emerging Discovery fund; Raphael Marechal, head portfolio manager for emerging markets at Nikko Asset Management; Wim Vandenhoeck, manager of the Emerging Markets Local Debt fund at Oppenheimer Funds; Mike Ingram, chief market strategist at WH Ireland; Paul McNamara, investment director at Gam; Eddy Sternberg, co-portfolio manager for emerging markets debt portfolios at Loomis Sayles; Michael Wang, fund manager for the global emerging markets and Asia team at Polar Capital; Tom Smith, co-head of emerging market equities at Neptune Investment Management; Lena Tsymbaluk, investment analyst at Morningstar; Investment Association; Morningstar.

eleanor.duncan@ft.com

In this guide

CPD
Approx.60min
  1. How does Mr Hovasse describe the political situation in Latin America?

  2. Latin American equities experienced a strong rally between which years?

  3. According to data from Morningstar, net outflows from Latin American equities for the 10 years to the end of 2017 were how much?

  4. In 2018, which three Latin American countries held presidential elections?

  5. Mexican government bonds yield how much?

  6. Is the following statement by Mr Marechal true or false? "Latin America clearly outperformed with a special mention for Colombia, one of the strongest fixed income markets so far in 2018."

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Be able to list what the long-term opportunities are for investing in the region.
  • Identify how Latin American equities have performed recently and over the longer term.
  • List the reasons Latin American bonds have outperformed and what political changes the region might face.

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