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SICAV

Latin American Equity Fund

Investing in expanding local companies with quality management and sustainable above-market earnings.

ISIN LU0347065905 Bloomberg TRPLAMI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

2.39%
$7.7m

1YR Return
(View Total Returns)

Manager Tenure

-11.56%
6yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.41
5.35%

Inception Date 24-Apr-2008

Performance figures calculated in USD

Other Literature

29-Feb-2020 - Verena Wachnitz, Portfolio Manager,
Latin American equities have been volatile recently on concerns about the coronavirus. While it is unclear how long market turbulence will persist, periods like this can open up opportunities. We believe our in-depth research and analysis leaves us well placed to identify and exploit such investment potential. Furthermore, in our view, the long-term outlook for the region remains attractive, with advantages such as favourable demographics and underpenetrated markets for a range of goods and services.
Verena Wachnitz
Verena Wachnitz, Portfolio Manager

Verena Wachnitz is the portfolio manager for the Latin America Equity Strategy. Prior to this, she was an analyst in the Equity Research team, covering the telecom, financials, materials and real estate sectors in Latin America. Ms. Wachnitz is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Click for Manager Outlook
 

Strategy

Manager's Outlook

Our investment process relies on the bottom-up assessment of an individual company's prospects, rather than on an attempt to exploit broad shifts between markets and sectors based on political or economic developments. That said, a deep understanding of top-down considerations is vital to our analysis, and while the region has made tangible economic progress over the past few years, undoubtedly more challenges lie ahead.

In Brazil, while growth has been muted in recent months, the economy avoided slipping into a technical recession in 2019. The completion of the long-awaited pension reform, which was passed in October, is likely to provide a boost to growth and business confidence. As well as aiding the state in reining in its fiscal deficit, we believe the reform may be a notable achievement for President Jair Bolsonaro's government and may pave the way for a continuation of the wider reform agenda, which includes an overhaul of the tax system and a privatization program. We think that continued structural reform is likely to be vital to Brazil's evolution and the creation of better growth prospects and more favorable investment conditions going forward.

��

The Mexican economy has been stagnating following weak levels of investment. Growth has stalled and business confidence appears to be low. However, equity markets now seem to be pricing in these concerns and we think valuations look reasonable. Mexico has been a beneficiary of the U.S.-China trade war, and we await the ratification of Mexico's trade agreement with the U.S. and Canada. We are able to find value in select pockets of the economy and are keeping a close watch on developments from here.

��

Given the political situation and recent change of government in Argentina, we remain cautious on the prospects for this market. The new government has inherited high indebtedness, an economy in recession, and a delicate fiscal situation. We believe this is likely to be extremely challenging, even if the administration has a willingness to fix the imbalances (this, to date, is unclear). Much uncertainty remains, and we are taking a highly selective approach.

��

Meanwhile, the economies of the Andean region are generally well managed, in our view, and are producing solid growth. We are finding opportunities here, particularly among well-managed financials, given the consolidated banking system and capacity for increased penetration. In Chile, investor sentiment has been affected by ongoing civil unrest and the uncertainty that this brings. Against this background, we think that economic growth is likely to be slower than had previously been expected. Having said that, our base case is that Chile will remain a well-run economy, so we maintain select investments in high-conviction names. In Peru, recent domestic political volatility and upcoming elections bring some uncertainty in the short term, but we do not expect it to disrupt the long-term fundamentals.

��

We believe the long-term outlook for Latin America remains attractive. Growing middle classes and political reform are creating opportunities for competent management teams that are nimble enough to seize them. We continue to devote substantial effort to meeting with and assessing company managers through regular travel to the region. We are confident that such meetings and careful fundamental analysis will allow us to identify companies with high returns and sustainable above-market earnings growth rates.

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a widely diversified portfolio of stocks of companies in Latin America.

Investment Approach

  • Employ fundamental analysis to identify companies with sustainable above-market earnings growth rates.
  • Focus on franchise strength, management team quality, free cash flow, and financing/balance sheet structure.
  • Verify relative valuation appeal versus both local market and region.
  • Apply negative screening for macroeconomic and political factors to temper bottom-up enthusiasm for specific securities.

Portfolio Construction

  • Typically 30-60 stock portfolio.
  • Individual positions typically range from 0.5% to 20.0% — average position size of 2.0% to 3.0%.
  • Sector ranges typically +/- 10.0% absolute deviation to the benchmark.
  • Country ranges typically +/- 10.0% absolute deviation to the benchmark.
  • Reserves typically range from 0.0% to 5.0%.
  • Expected Turnover 20.0% to 50.0%.

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % -11.56% 2.39% 3.04% -0.87% 1.13%
Indicative Benchmark % -11.85% 0.44% 0.86% -1.58% -1.08%
Excess Return % 0.29% 1.95% 2.18% 0.71% 2.21%

Inception Date 24-Apr-2008

Manager Inception Date 25-Mar-2014

Indicative Benchmark: MSCI Emerging Markets Latin America 10-40 Index Net

Data as of  29-Feb-2020

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 22.68% 13.12% 7.00% 0.38%
Indicative Benchmark % 17.55% 10.80% 4.22% -0.22%
Excess Return % 5.13% 2.32% 2.78% 0.60%

Inception Date 24-Apr-2008

Indicative Benchmark: MSCI Emerging Markets Latin America 10-40 Index Net

Data as of  31-Dec-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 26-Mar-2020 Quarter to DateData as of 26-Mar-2020 Year to DateData as of 26-Mar-2020 1 MonthData as of 29-Feb-2020 3 MonthsData as of 29-Feb-2020
Fund % -26.13% -38.89% -38.89% -13.15% -10.20%
Indicative Benchmark % -29.75% -41.69% -41.69% -12.06% -8.42%
Excess Return % 3.62% 2.80% 2.80% -1.09% -1.78%

Inception Date 24-Apr-2008

Indicative Benchmark: MSCI Emerging Markets Latin America 10-40 Index Net

Indicative Benchmark: MSCI Emerging Markets Latin America 10-40 Index Net

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

29-Feb-2020 - Verena Wachnitz, Portfolio Manager,
Latin American equity markets fell sharply in February in U.S. dollar terms and underperformed most emerging and developed world peers. Investor concerns about the spread of the coronavirus around the world and the potential impact on global economic growth saw a sharp reduction in risk appetite and a sell-off in commodities such as oil. The Brazilian market underperformed as investors reduced their appetite for risk, with U.S. dollar returns hurt by the depreciation of the real. Mexican equities fell, and the weakness of the peso weighed on performance in U.S. dollars. Both the Brazilian and Mexican central banks reduced interest rates. The fall in the price of oil had a negative effect on the Colombian market, as did local currency weakness. At the portfolio level, our underweight to the communication services sector hampered relative performance. On the positive side, stock selection in Brazil was beneficial. Our avoidance of iron ore producer Vale boosted relative returns; the share price fell sharply on iron ore price weakness. Brazilian bank Itau Unibanco outperformed; the company unveiled results that were in line with expectations and which showed growth in earnings and loans.

Holdings

Total
Holdings
52
Largest Holding Banco Bradesco 9.82% Was (30-Sep-2019) 9.05%
Other View Full Holdings Quarterly data as of 31-Dec-2019
Top 10 Holdings 51.72% View Top 10 Holdings Monthly data as of 29-Feb-2020

Largest Top Contributor^

Banco Bradesco
By 0.08%
% of fund 9.75%

Largest Top Detractor^

Wal-Mart de Mexico
By -2.27%
% of fund 4.54%

^Absolute

Quarterly Data as of 31-Dec-2019

Top Purchase

BRF (N)
1.26%
Was (30-Sep-2019) 0.00%

Top Sale

BB Seguridade Participacoes
0.65%
Was (30-Sep-2019) 1.84%

Quarterly Data as of 31-Dec-2019

31-Dec-2019 - Verena Wachnitz, Portfolio Manager,

Latin America's advantages include favorable demographics and underpenetrated markets for a range of goods and services. Furthermore, in our view, some of the best corporate management teams in the emerging world are operating here. During the period, we reduced our relative exposure to Brazil, as we took some profit on a number of holdings that had performed well. While the portfolio is underweight to Brazil, it accounts for by far our largest country allocation. We reduced our underweight to Mexico. The portfolio remains overweight to Peru and Argentina and underweight to Chile.

Brazil

Brazil is our largest country position in absolute terms, although we are underweight as we are avoiding some of the more commodity-focused index heavyweights. We recently visited the country, which reinforced our view that it is the region's most attractive market from a macroeconomic perspective. The company management teams we met were fairly optimistic but also realistic in their expectations for the economy, with 2% GDP growth in 2020 seeming to be a base case; we are overweight to domestically focused stocks.

A number of our Brazilian holdings have delivered strong performance of late, and we took some profit on these; as a result, our relative position in this market was reduced over the quarter. We also added some new names to the portfolio.

  • We trimmed our position in insurance company BB Seguridade, primarily due to a full valuation. While we are cautious on the company's management, the firm's payout ratio is increasing. We decided to take some profit on the stock given the strong performance of the Brazilian market.
  • We reduced our holding in drugstore retailer Raia Drogasil. Given recent strength in the share price, we decided to take some profit here and reduce our position size as the price approached our fair value estimate. Over the quarter, the company reported strong sales and increasing market share.
  • We trimmed our holding in apparel retail company Lojas Renner, taking profit given strong share price performance. We have some concerns regarding the slowing store pipeline given a lack of new mall development in recent and coming years. We think the company does, however, appear to be in a strong position to gain share relative to peers within the Brazilian apparel space.
  • We initiated a position in BRF, Brazil's leading food producer. We believe the company looks set to benefit from better export and domestic prices, a weaker real, and lower near-term feed costs. In our view, management is sound and underlying cyclical drivers may be supportive for the share price and help to accelerate the company's deleveraging process.
  • We purchased a position in telecommunications company TIM, which is a subsidiary of Telecom Italia. We expect mobile service revenue in Brazil to accelerate given an improving regulatory and competitor environment. Earlier in 2019, the company appointed a new CEO, who has more than 20 years of experience in the industry and achieved a good reputation in an earlier role as chief operating officer of the company.

Mexico

We have reduced the size of our underweight to Mexico; broadly speaking, we are more open to investment opportunities here than we have been of late. Overall, we believe that investor concerns related to populist President Andres Manuel Lopez Obrador are to a large extent priced in, although we remain mindful of the risks posed by a policy agenda that may be a headwind for business. The recent news on USMCA is also a positive development. We purchased a banking name during the quarter.

  • We initiated a position in Regional, a business bank that we view as high quality. The bank operates in northern Mexico, the part of the country that we believe has the potential to grow most rapidly and that would be helped by the finalization of USMCA. In our view, management has exhibited a diligent approach and has launched a number of initiatives in the digital payments space.

Peru

The Peruvian market has derated against a background of domestic political volatility. In our view, developments have not been as negative as they might have been, but uncertainties remain, particularly with elections on the horizon. Having said that, we are overweight to this market. While the near-term economic outlook has softened, we continue to see Peru as a well-managed economy. The portfolio has investments in areas including banking and consumer stocks in order to benefit from the country's growing middle class.

Argentina

While we are overweight to Argentina, we are pursuing a highly selective investment approach. Macroeconomic conditions are challenging, with high inflation and weak growth. Peronist Alberto Fernandez has taken charge after his victory in October's presidential election, and the new administration has already put in place some measures that have been viewed negatively by investors.

  • Our largest holdings here are in stocks that have limited exposure to the domestic economy and where we think the medium- to long-term investment case still holds. These are MercadoLibre, which operates the biggest online trading platform in Latin America, and Tenaris, which produces seamless and welded pipes for the oil and gas industry.

Chile

We are underweight to Chile. Investor sentiment has been affected by recent civil unrest, and we believe the country may face 12 to 18 months of uncertainty as constitutional reforms take place. Against this background, we think that economic growth is likely to be slower than had previously been expected. Having said that, our base case is that Chile will remain a well-run economy, so we maintain select investments among banking, consumer, and real estate firms.

Sectors

Total
Sectors
10
Largest Sector Financials 38.14% Was (31-Jan-2020) 38.09%
Other View complete Sector Diversification

Monthly Data as of 29-Feb-2020

Indicative Benchmark: MSCI Emerging Markets Latin America 10/40 Index

Top Contributor^

Consumer Discretionary
Net Contribution 0.91%
Sector
0.30%
Selection 0.61%

Top Detractor^

Energy
Net Contribution -0.45%
Sector
-0.38%
Selection
-0.07%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Financials
By6.69%
Fund 38.14%
Indicative Benchmark 31.45%

Largest Underweight

Energy
By-6.91%
Fund 3.22%
Indicative Benchmark 10.13%

Monthly Data as of 29-Feb-2020

29-Feb-2020 - Verena Wachnitz, Portfolio Manager,
We are underweight the materials sector as, by and large, we do not see many companies here with sufficient growth potential. Having said that, we have identified a few good investment opportunities. We hold mining company Southern Copper, which has around half of its production base in Mexico, and half in Peru. We see the company as a solid dividend play for the next few years, as it has stable, mature operations and low capital expenditure. On a longer-term view, the company has access to sizeable copper reserves and a range of options for new development that we think are attractive.

Countries

Total
Countries
9
Largest Country Brazil 59.48% Was (31-Jan-2020) 60.27%
Other View complete Country Diversification

Monthly Data as of 29-Feb-2020

Indicative Benchmark: MSCI Emerging Markets Latin America 10/40 Index

Top Contributor^

Brazil
Net Contribution 0.67%
Country
-0.08%
Selection 0.74%

Top Detractor^

Argentina
Net Contribution -0.10%
Country
0.22%
Selection
-0.31%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Argentina
By5.06%
Fund 5.06%
Indicative Benchmark 0.00%

Largest Underweight

Mexico
By-6.62%
Fund 15.57%
Indicative Benchmark 22.20%

Monthly Data as of 29-Feb-2020

29-Feb-2020 - Verena Wachnitz, Portfolio Manager,
We are underweight Colombia, one of the smaller Latin American markets. Broadly speaking, it is energy driven, as oil is an important export for the country. We hold one position here, Grupo Aval, which is Colombia’s largest banking group with a market share of nearly a third. It operates four commercial banks in Colombia as well as a merchant bank and a pension fund manager. The group also has a significant presence in a number of Central American countries. Overall, we see Grupo Aval as a high-quality franchise and expect it to benefit from an acceleration in domestic loan growth.

Team (As of 09-Mar-2020)

Verena Wachnitz

Verena Wachnitz is the portfolio manager for the Latin America Equity Strategy. Prior to this, she was an analyst in the Equity Research team, covering the telecom, financials, materials and real estate sectors in Latin America. Ms. Wachnitz is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Ms. Wachnitz has 14 years of investment experience, all of which have been with T. Rowe Price. Prior to joining the firm in 2003, she was an investment analyst with Centro de Estudios de Transporte e Infraestructura.

Ms. Wachnitz earned a B.A. in economics and a master's degree in finance from Universidad de San Andres. She also has earned the Chartered Financial Analyst designation. She is fluent in Spanish, German, Portuguese and English.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    16
  • Years investment
    experience
    16
Todd  J.  Henry

Todd Henry is the global head of portfolio specialists and portfolio analysts. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Mr. Henry has 28 years of industry experience, all of which have been at T. Rowe Price. Prior to leading the portfolio specialist and portfolio analyst team, Mr. Henry was a portfolio specialist covering our broad suite of international equity and emerging markets equity strategies. He has traveled around the world extensively and spent over two years in the firm's London office working alongside the emerging markets equity team and other investment professionals. 

Mr. Henry earned a B.A. in economics from the University of Delaware and an M.B.A. in international business from Johns Hopkins University. He also has earned the Chartered Financial Analyst designation and is a Series 7 registered representative.

  • Years at
    T. Rowe Price
    28
  • Years investment
    experience
    28
Nick Beecroft

Nicholas Beecroft is a portfolio specialist in the Equity Division at T. Rowe Price, representing the firm's global equity strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Beecroft has 18 years of investment experience, 14 of which have been with T. Rowe Price. He joined the firm in London in 2005 and spent many years working with our emerging markets equity team. Mr. Beecroft has been based in Hong Kong since 2011. Prior to joining T. Rowe Price, he was an investment analyst at Mercer Investment Consulting.

Mr. Beecroft earned a B.A, with honours, in contemporary European studies from the University of Southampton. He also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    15
  • Years investment
    experience
    19
Kanwal Masood

Kanwal Masood is a portfolio specialist in the Equity Division at T. Rowe Price, covering the Middle East and Africa Equity and Emerging Europe Equity Strategies. She is an associate vice president of T. Rowe Price International Ltd.

Ms. Masood has 10 years of investment experience, all of which have been with T. Rowe Price. She joined the firm in 2007, covering the global and regional emerging market equity strategies as a portfolio analyst. Prior to joining T. Rowe Price, she was a product specialist at the London Stock Exchange.

Ms. Masood earned a B.Sc. with honours in mathematics and computer science from King's College London.

  • Years at
    T. Rowe Price
    13
  • Years investment
    experience
    13

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 190 basis points 2.07%
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.10%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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