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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)

13.12%
$9.3m

1YR Return
(View Total Returns)

Manager Tenure

22.68%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.51
5.41%

Inception Date 24-Apr-2008

Performance figures calculated in USD

Other Literature

31-Dec-2019 - Verena Wachnitz, Portfolio Manager,
Latin America’s advantages include favourable 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. We devote substantial effort to assessing companies and meeting with management through regular travel to the region. We are confident that our in-depth research and analysis will enable us to identify firms that offer strong and sustainable profits 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 % 22.68% 13.12% 7.00% 0.38% 4.55%
Indicative Benchmark % 17.55% 10.80% 4.22% -0.22% 2.13%
Excess Return % 5.13% 2.32% 2.78% 0.60% 2.42%

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  31-Dec-2019

  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 15-Jan-2020 Quarter to DateData as of 15-Jan-2020 Year to DateData as of 15-Jan-2020 1 MonthData as of 31-Dec-2019 3 MonthsData as of 31-Dec-2019
Fund % -1.21% -1.21% -1.21% 8.55% 11.11%
Indicative Benchmark % -1.53% -1.53% -1.53% 10.33% 10.48%
Excess Return % 0.32% 0.32% 0.32% -1.78% 0.63%

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. 

31-Dec-2019 - Verena Wachnitz, Portfolio Manager,
Latin American equities delivered strong returns in December in U.S. dollar terms and outperformed broader emerging and developed world peers. Investor sentiment was boosted by some favourable developments in U.S.-China trade relations. In other news, the U.S. House of Representatives approved the trade deal that has been negotiated with Mexico and Canada to replace NAFTA. The U.S. Senate is expected to vote on the new agreement, called USMCA, in early 2020. Brazilian equities outperformed, with U.S. dollar returns boosted by the appreciation of the real. Data were released that showed the domestic economy performing better than expectations, while the country’s central bank reduced interest rates further. The Mexican market underperformed, despite the beneficial impact of the appreciating peso on U.S. dollar returns. At the portfolio level, our choice of securities in Brazil weighed on relative performance. Shares in stock exchange company B3 gave back some ground over the month following the strong returns seen earlier in 2019. We continue to hold the company, which we expect to benefit from improving domestic growth and stock market performance. On the positive side, our underweight to Mexico added value.

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 52.52% View Top 10 Holdings Monthly data as of 31-Dec-2019

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

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

We think Latin America is an attractive region for investment, with advantages such as positive demographics and underpenetrated markets for a range of goods and services. Furthermore, in our view, some of the best company management teams in the emerging world are operating in Latin America. We devote substantial effort to meeting with and assessing companies through regular travel to the region. We are confident that our in-depth research and analysis will enable us to identify firms that offer superior and sustainable earnings growth.

We have a small underweight to Brazil, but this market accounts for by far our largest country position in absolute terms. We retain a large underweight to Mexico. The portfolio is overweight to Peru and Argentina, although we reduced the size of both positions over the quarter. We remain underweight to Chile and Colombia.

Brazil

We remain positive on Brazil, where we believe an improvement in growth, low inflation, and low interest rates are likely to be supportive for corporate earnings. While we retain a small underweight, this is largely due to our relatively low exposure to commodity companies, where we are generally not seeing sufficient growth potential. The portfolio has a large overweight to domestically focused names. In our view, there is scope for consumer spending to lead economic recovery, and we are finding good opportunities among select consumer and financials stocks. We added some new names during the quarter and topped up an existing holding.

  • We built a position in Petrobras Distribuidora, the largest fuel distribution company in Brazil. Petrobras, its state-run parent company, reduced its holding to less than 50% in July, effectively privatizing the firm. We believe this frees management from many of the obligations of state-run companies and allows for greater flexibility and a better alignment of interests and incentive plans. In our view, while valuations are not cheap, there is scope to reduce costs in the longer term and the stock offers a compelling risk/reward profile.
  • We added to our position in Ambev, a beer and soft drinks producer and distributor that operates through a partnership with PepsiCo. The company delivered solid first-half results, despite the low-growth environment. Management is focused on rebuilding market share, and we see Ambev benefiting from healthy consumption in Brazil, which accounts for the lion's share of its earnings.
  • We initiated a position in the copper miner Ero Copper, which operates in Brazil through its ownership of the Mineracao Caraiba S.A. (MCSA) mining complex. The company bought MCSA in 2016 and, in our view, is creating value by improving efficiencies and growing return on investment capital incrementally.

Mexico

We are cautious on the outlook for Mexico and retain a large underweight. The domestic economy is stagnating and political risk remains a concern, given the powerful position of populist President Andres Manuel Lopez Obrador and the scope he has to make constitutional reforms. However, we are finding pockets of investment potential among select consumer, real estate, and infrastructure-related names. During the quarter, we added to one of our holdings and trimmed some other positions.

  • We topped up our position in Mexican airport operator Grupo Aeropuerto del Sureste, which runs nine airports in the south eastern states of the country. We believe the company has generated resilient free cashflow, while we also think it has attractive traffic growth potential and significant commercial revenue upside.
  • We trimmed our position in retailer Wal-Mart de Mexico, which operates supermarkets, discounters, membership clubs, supercenters, and apparel stores. The stock has outperformed significantly over the year, and we feel that valuations are now looking richer. We reduced our position in order to take advantage of buying opportunities elsewhere.
  • We reduced our position in Arca Continental, a manufacturer and distributor of Coca-Cola Company beverages. We believe that a more cautious view on consumption in Mexico, from where around two-thirds of the company's sales are derived, is a potential headwind for the stock.

Argentina

We have reduced our overweight on a deterioration in the political outlook. In our view, it looks unlikely that President Mauricio Macri will win the presidential elections in late October and be able to continue with his reform agenda and market-friendly policies. We remain cautious as whoever makes up Argentina's next government will inherit highly challenging fundamentals: a high level of indebtedness, an economy in recession, low reserves, high inflation, and a delicate fiscal situation. While we retain some core holdings with limited domestic exposure, we eliminated our position in a few domestically focused names.

  • For example, we sold out of our position in Despegar, Latin America's leading online travel agency. The company has a high exposure to Argentina, which accounts for more than a fifth of transactions. Given the current political uncertainty, we believe that risks to Argentina's growth and recovery will be a likely headwind.
  • Our largest holdings in this market are in stocks that have limited exposure to the domestic economy and where we believe the medium- to long-term thesis still holds: 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).

Peru

We believe that Peru is a well-managed economy offering a decent level of growth while it also has a relatively low public debt/gross domestic product ratio. However, there have been heightened political uncertainties of late, and the near-term economic outlook has deteriorated somewhat; we are closely monitoring the situation. We are also mindful of this market's sensitivity to some commodity prices, particularly copper. While we remain overweight, we have trimmed this position, both for macro and stock-specific reasons.

  • We eliminated our position in mining company Cia de Minas Buenaventura, which is engaged in the mining and exploration of gold, silver, and other metals. We think that results have been weak, and the risk/reward profile is no longer attractive. We struggle to see any catalysts for growth in the medium term.

Chile

We generally like the fundamentals for Chile. We think it has a well-managed economy, with relatively low public sector indebtedness and solid growth, although we are cognizant of the market's sensitivity to the price of copper. However, we remain underweight, largely as a result of market structure. A sizable proportion of the index is made up of low-growth or highly regulated businesses of the type we generally avoid, such as telecommunications companies, utilities, and conglomerates. Having said that, we have identified some investment potential here among select banking, consumer, and real estate names.

Sectors

Total
Sectors
10
Largest Sector Financials 38.28% Was (30-Nov-2019) 38.75%
Other View complete Sector Diversification

Monthly Data as of 31-Dec-2019

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
By5.89%
Fund 38.28%
Indicative Benchmark 32.39%

Largest Underweight

Energy
By-8.78%
Fund 1.42%
Indicative Benchmark 10.20%

Monthly Data as of 31-Dec-2019

31-Dec-2019 - Verena Wachnitz, Portfolio Manager,
The portfolio is overweight to the financials sector, where we have identified good opportunities among Brazilian banks, such as Itau Unibanco and Banco Bradesco. We are finding value in this area of the market, especially for Bradesco, while we also believe there is growth momentum for these companies. In particular, we think that an ongoing improvement in the domestic economy would provide a tailwind for Brazilian banks.

Countries

Total
Countries
9
Largest Country Brazil 61.61% Was (30-Nov-2019) 61.64%
Other View complete Country Diversification

Monthly Data as of 31-Dec-2019

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
By4.68%
Fund 4.68%
Indicative Benchmark 0.00%

Largest Underweight

Mexico
By-5.50%
Fund 14.85%
Indicative Benchmark 20.35%

Monthly Data as of 31-Dec-2019

31-Dec-2019 - Verena Wachnitz, Portfolio Manager,
The Peruvian market has de-rated against a background of domestic political volatility. In our view, developments have not been as negative as they could 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.

Team (As of 06-Jan-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
    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 $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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