BlackRock Latin American (BRLA) invests in Latin America for capital growth, using the full extent of BlackRock’s resources as the world’s largest money manager to generate alpha from stock selection and proprietary macroeconomic analysis.
Since 2018, BRLA has also paid a quarterly dividend set at 1.25% of NAV, equivalent to 5% at a constant NAV. The board can pay this out of capital where necessary, which means the managers can continue to focus on the best growth prospects without having to sacrifice growth for yield.
Managers Ed Kuczma and Sam Vecht took over in January 2019. Their aim has been to make the portfolio more active, with individual stock picks more important to performance. As we discuss in the Performance section, this has generally been successful, although the region has been rocked by two major crises during the managers’ tenure.
The MSCI EM Latin America benchmark is dominated by Brazil (c. 61%) and Mexico (c. 24%), and BRLA’s portfolio is similarly weighted. The region’s markets were among the worst hit by the coronavirus pandemic with a c. 45% peak-to-trough fall. The index is now trading on extremely low P/E levels and BRLA is on a 10.3% discount (see the Discount section).
The only two other closed-ended funds investing in Latin America are very small (with net assets well below £50m). As a result, their charges are double BRLA’s. With open-ended funds also rare, BRLA is one of the few options for exposure to the region, and benefits from the advantages of closed-ended funds such as the ability to gear and not having to sell into falling markets.