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SICAV

Latin American Equity Fund

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

ISIN LU0347065905 WKN A0MXMT

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

7.71%
$8.4m

1YR Return
(View Total Returns)

Manager Tenure

16.17%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.51
5.26%

Inception Date 24-Apr-2008

Performance figures calculated in USD

Other Literature

30-Sep-2019 - Verena Wachnitz, Portfolio Manager,
We believe the long-term outlook for Latin America remains attractive. In our view, growth in the region’s middle class and political reform are creating opportunities for competent management teams that are nimble enough to seize them. We devote substantial effort to meeting with and assessing company managers through regular travel to Latin America. We are confident that such meetings and careful fundamental analysis will enable us to identify companies that offer strong and sustainable earnings growth.
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.

 

Strategy

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 % 16.17% 7.71% 1.95% 0.76% 2.78%
Indicative Benchmark % 6.77% 6.87% -0.75% -0.03% 0.40%
Excess Return % 9.40% 0.84% 2.70% 0.79% 2.38%

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  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 16.17% 7.71% 1.95% 0.76%
Indicative Benchmark % 6.77% 6.87% -0.75% -0.03%
Excess Return % 9.40% 0.84% 2.70% 0.79%

Inception Date 24-Apr-2008

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

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 17-Oct-2019 Quarter to DateData as of 17-Oct-2019 Year to DateData as of 17-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % 2.81% 2.81% 13.51% 2.30% -5.41%
Indicative Benchmark % 2.03% 2.03% 8.56% 2.62% -5.61%
Excess Return % 0.78% 0.78% 4.95% -0.32% 0.20%

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. 

30-Sep-2019 - Verena Wachnitz, Portfolio Manager,
Latin American equities rose in September in U.S. dollar terms; they outperformed broader emerging market peers and the MSCI World Index. Trade tensions between the U.S. and China appeared to ease, while China unveiled some economic stimulus measures. In other developments, the U.S. Federal Reserve reduced interest rates by a quarter of a percentage point. Brazilian equities rose against the background of improved global investor sentiment. The country’s central bank also cut interest rates. Mexican equities were in positive territory, with U.S. dollar returns boosted by an appreciation in the peso; the Mexican central bank also reduced interest rates, as inflation markedly slowed. Argentine equities outperformed, recovering some ground after the sharp falls seen in August. President Mauricio Macri put currency controls in place in a bid to support the peso and shore up the country’s foreign exchange reserves. At the portfolio level, our overweight to Argentina had a positive effect, although this was offset by the negative impact of stock selection. Our main holding here is MercadoLibre, which operates the largest online trading platform in Latin America. While the share price weakened over the month, we remain invested as we believe MercadoLibre’s strong market position and experience in e-commerce means it is well-placed to capitalise on digital payments in an under-banked region.

Holdings

Total
Holdings
50
Largest Holding Itau Unibanco Holding 9.36% Was (30-Jun-2019) 9.92%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 54.06% View Top 10 Holdings Monthly data as of 30-Sep-2019

Largest Top Contributor^

BM&FBOVESPA
By 0.71%
% of fund 5.70%

Largest Top Detractor^

Itau Unibanco Holding
By -0.29%
% of fund 9.23%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Ambev
4.24%
Was (30-Jun-2019) 3.23%

Top Sale

Compania de Minas Buenaventura (E)
0.00%
Was (30-Jun-2019) 0.84%

Quarterly Data as of 30-Sep-2019

30-Jun-2019 - Verena Wachnitz, Portfolio Manager,

We think Latin America is an attractive region for investment, with advantages such as positive demographics, underpenetrated markets for a range of goods and services, and relatively low geopolitical risk. Furthermore, in our view, some of the best company management teams in the emerging world are operating in Latin America. We believe that our detailed research, including frequent visits to the region, will help us take advantage of the considerable investment potential in these markets.

Brazil accounts for by far our largest country position in absolute terms, although we have a small underweight here. The portfolio retains its large underweight to Mexico. We are overweight to Peru and Argentina and underweight to Chile and Colombia.

We Think The Positives For Brazil Are Not Yet Fully Priced In

Brazil remains our largest country position. However, we have a small underweight versus the benchmark because of our relatively low exposure to commodity-related companies, where we are not seeing many good growth opportunities. We are generally finding better investment potential among financials, consumer-related stocks, and real estate names.

We continue to be positive on the prospects for this market following a recent investment research trip and believe the macro backdrop is broadly favorable. Although growth is unlikely to be high (barring further structural reforms in addition to the pension system changes we expect), we think gross domestic product (GDP) growth in the range of 2.0% to 2.5% in an environment of low inflation and interest rates could provide an encouraging environment for company earnings. Equity market inflows may also be supportive, in our view. Local investors appear to have started a shift to higher-risk investments, given historically low domestic interest rates. Although Brazilian equities have delivered strong returns of late, we do not think these positives are fully priced in. We believe there is scope for further market rerating and have identified several companies that we think offer healthy upside potential, particularly on a three-year view. During the period, we purchased some new positions and trimmed or eliminated a number of holdings.

    • We purchased Localiza, Latin America's largest car rental company. We think the business is well run and is employing a durable strategy to consolidate Brazil's large and high-growth car rental market. After significant investment across its platform, we see a long runway for a sustainable increase in earnings, driven by rental growth and strong operating leverage.
    • We built a new position in IT business Linx, a market leader in retail management software with a sizable market share. We expect organic growth to accelerate over the next few years, with help from a better retail environment in Brazil, while the company's ability to cross-sell its new payments service provides ancillary growth potential.
    • We opened a position in energy utility CPFL Energia, participating in the company's follow-on share offering. The proceeds of the share issue will be used to acquire shares in its subsidiary CPFL Energias Renovaveis, which we see as a positive move.
    • We sold our position in holding company Ultrapar, which operates several distribution and retail services arms. From here, we see weakening growth in fuel volumes on the back of lower fuel imports and more aggressive pricing, while earnings losses at its specialty chemicals business also impact our investment case.
    • We trimmed our position in Lojas Renner, Brazil's second-largest apparel retail store. We think its valuation has become stretched and currently screens as high versus other global apparel brands, which prompted us to reduce our position further this quarter after a significant rally. However, we retain a large overweight to the name, given our bullish long-term thesis built on strong brand awareness, solid store execution, and digital and omnichannel offerings that we believe rank far ahead of competitors. An environment of low inflation, low rates, and robust credit conditions are likely to be of additional support to sales, in our view.

We Remain Cautious On Mexico, Although We Are Finding Pockets Of Investment Potential Here

The portfolio has a large underweight to Mexico, where we believe persistent political risk and underwhelming economic growth prospects merit a cautious stance. GDP growth appears to be decelerating, and we continue to closely monitor policy developments from populist President Andres Manuel Lopez Obrador's administration.

Having said that, our highly detailed research has helped us to find some stock-specific investment opportunities in this market. For example, we are maintaining our long-term holding in retailer Wal-Mart de Mexico (Walmex). While the valuation is not particularly cheap, we view Walmex as a high-quality company, and we are impressed by its use of technology to improve productivity and customer service.

We Are Identifying Opportunities In Peru Among Banking And Mining Names

We are overweight to Peru. The country's economy is well managed, in our view, and is achieving a good level of growth. However, there are some uncertainties in domestic politics, particularly given wrangling between President Martin Vizcarra and Congress over his anti-corruption reforms, and we are monitoring the situation.�

We are finding opportunities here in areas including banking and mining. Our main holding is in financial services group Credicorp, which generates the lion's share of its earnings from its banking operation in Peru, where it has a large market share. We view the banking market in Peru as the most consolidated and profitable in Latin America and believe Credicorp is well placed to benefit from robust domestic economic conditions and accelerating loan growth.

Uncertainties Remain In Argentina, Although We Have Become More Positive About This Market

While there are challenges for Argentina from a top-down perspective, we have become more positive on this market and are identifying stock-specific opportunities. Uncertainties remain about the presidential elections scheduled for October, although recent developments concerning the candidates standing in it have provided reasons for optimism about the possibility of a "market friendly" outcome. Macroeconomic conditions remain tough; however, there are indications that the country's economic adjustment is on track, with the current account deficit having narrowed and government finances having shown some signs of improvement over the last 12 months.

The portfolio is overweight to Argentina. Our largest holdings are in stocks that have limited exposure to the domestic economy: 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). Excluding these names, we have a marginal overweight to domestically focused stocks, where we have selectively added exposure over the quarter. We also trimmed or eliminated some holdings.

    • We bought a position in banking name BBVA Argentina, as we became more optimistic about the outlook for the country. We like the quality of BBVA's banking franchise and believe it is well positioned to benefit from an acceleration in credit demand from a low base, given its rising market share of loans to consumers and small and medium-sized enterprises. We also think BBVA is trading at a compelling valuation.
    • We eliminated our position in IT services business Globant. We think the valuation looks rich following a strong rally over the last 18 months or so, and we are less comfortable about the balance between risk and potential reward at current levels.
    • We trimmed our position in MercadoLibre on strength, although our conviction in the name remains high. We recently had a positive meeting with the company's payments team, which has launched a new device to help target larger merchants. We see the business becoming a regional leader in the digital services space given its vibrant marketplace ecosystem and strong competitive position. In our view, this may enable MercadoLibre to capitalize on digital payment growth in an underbanked continent.

Sectors

Total
Sectors
11
Largest Sector Financials 39.33% Was (31-Aug-2019) 38.74%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

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

Top Contributor^

Materials
Net Contribution 0.48%
Sector
0.55%
Selection -0.07%

Top Detractor^

Communication Services
Net Contribution -0.39%
Sector
-0.37%
Selection
-0.02%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Consumer Discretionary
By6.69%
Fund 12.40%
Indicative Benchmark 5.71%

Largest Underweight

Energy
By-8.59%
Fund 1.29%
Indicative Benchmark 9.88%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Verena Wachnitz, Portfolio Manager,
The portfolio has a sizeable underweight to the communication services space. This is chiefly a result of our relatively low exposure to telecommunication services companies. While these names have relatively defensive qualities, in our view, they are generally “ex growth” and seem unlikely to be able to generate sufficient levels of shareholder value over time, given their limited pricing power. We are overweight to consumer-related sectors. In our view, increasing regional wealth is likely to support consumption growth, and we have identified a number of companies in this space that we see as well positioned to benefit.

Countries

Total
Countries
9
Largest Country Brazil 60.85% Was (31-Aug-2019) 61.04%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2019

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

Top Contributor^

Brazil
Net Contribution 0.55%
Country
-0.05%
Selection 0.60%

Top Detractor^

Argentina
Net Contribution -0.43%
Country
-1.93%
Selection
1.51%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Argentina
By4.42%
Fund 4.42%
Indicative Benchmark 0.00%

Largest Underweight

Mexico
By-7.64%
Fund 13.63%
Indicative Benchmark 21.27%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Verena Wachnitz, Portfolio Manager,
In Brazil, we think the completion of pension reform, which is due in the near future, is likely to boost growth and business confidence, and may pave the way for a continuation of the government’s broader reform agenda. We believe continued structural reform will be vital to Brazil’s evolution and the creation of better growth prospects and more favourable investment conditions. While we retain a small underweight here, this is largely due to our relatively low exposure to commodity companies, where we are generally not seeing sufficient growth potential. We have a large overweight to domestically-focused Brazilian names, as we are finding good opportunities among selected consumer and financials stocks.

Team (As of 31-Aug-2019)

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
    27
  • Years investment
    experience
    27
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
    14
  • Years investment
    experience
    18
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
    12
  • Years investment
    experience
    12

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount 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 $1,000 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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