BlackRock Latin America (BRLA) aims to profit from the growth potential in Latin American equities, chiefly those of Brazil and Mexico. The trust is managed by Ed Kuczma and Sam Vecht, who lean on the deep resources of the broader BlackRock emerging markets team. Currently BRLA is heavily weighted towards Brazil. The managers are highly bullish on the country thanks to its favourable political scene, the potential for further interest rate cuts and booming personal consumption.
Although Ed and Sam aim to maximise capital growth, the trust pays out 1.25% of NAV each quarter as a dividend, which would be 5% on a constant NAV basis. The dividend is paid from capital if income is not sufficient.
The trust’s process has been revamped under the new managers, who took over in January 2019. While the key elements of the strategy remain the same, there has been greater integration with the wider EM team, aided by Sam’s presence. Sam heads the EMEA, Frontiers and Latin America desk and runs portfolios with a broader focus, while Ed is a Latin America specialist. The managers report that they have integrated macro and political analysis deeper into the portfolio construction process, while they have also made the portfolio more concentrated and active, increasing its potential for outperformance.
BRLA is overweight Brazil and Mexico, and gearing is also high relative to its possible range, indicating the managers’ optimism for their markets and expectations of good returns to come. Their more active stance has not yet been rewarded with returns, however, as we discuss in the performance section.
BRLA currently trades on a 12.7% discount at the current share price, close to its five-year average of 13%. The discount narrowed in the first half of the year, following the announcement that Ed and Sam were taking over as managers, but has widened back out to near where it started 2019.