U.S. Markets closed

The Aberdeen Latin American Equity Fund: Stocks Fall in 2015

David Ashworth

Gone South: Latin America–Focused Mutual Funds Have a Rough 2015

(Continued from Prior Part)

Performance evaluation

The Aberdeen Latin American Equity Fund – Class A (ALEAX) fell by 4.2% in December 2015 from a month prior. In the three- and six-month periods ended December 31, the fund fell 3.1% and 22.5%, respectively. In the one-year period, it dived by 27.8%. From the end of December 2015 to January 25, the fund fell 10.8%.

Among the eight funds in this review, ALEAX fell the least in December. Though it did not have a great 4Q15, it had the third-smallest decline in 2015. Let’s see what helped the fund reduce its downside somewhat compared with most other funds in 2015.

Portfolio composition and contribution to returns

ALEAX has the smallest track record among all the funds in this review. It has been in existence since March 2013.

Financials have been primarily responsible for the fund posting -27.8% returns in 2015, with the sector contributing over a third of the fund’s negative returns for the year. Among holdings from the financial sector, Banco Bradesco (BBD) was by far the biggest negative contributor to returns. Itaú Unibanco Holding (ITUB) and Multiplan Empreendimentos Imobiliários were other major negative contributors. Grupo Financiero Banorte made a small positive contribution, but given the large negative contributions of all other holdings, it was not very meaningful.

Even though materials formed less than 4% of the fund’s assets, they emerged as the second-biggest negative contributor to returns for 2015. Vale (VALE) was responsible for most of the negative contribution from the sector.

Industrials followed, driven down by negative contributions from Graña y Montero (GRAM) and Localiza Rent a Car. Grupo Aeroportuario del Sureste (ASR) and Grupo Aeroportuario del Centro Norte (OMAB) contributed positively to returns, thereby reducing some drag caused by negative contributors.

Reasons for performance

Brazil’s poor position in 2015 reflected on all associated instruments, especially ALEAX, which had a large portion of its assets in equities from the country. A loss of investor confidence hit the country’s stocks hard. However, positive contributions from sizable holdings such as Embotelladora Andina (AKO.A) and Fomento Económico Mexicano (FMX) reduced the drag on the fund’s overall returns, thereby placing its performance in the third spot among the eight funds in this review.

In the next article, we’ll look at the second fund in our review, the Epiphany FFV Latin America Fund – Class A (ELAAX).

Continue to Next Part

Browse this series on Market Realist: