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Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.

The Liontrust Latin America Fund returned -8.9% during the fourth quarter of 2021, compared with a return of -3.1% for the MSCI EM Latin America Index and the IA Latin America return of-5.4% (comparator benchmarks)*.

Latin American markets had a weak end to 2021 as the pandemic continued to weigh on activity, while monetary policy was tightened across the region in response to higher inflation. Negative performance was exacerbated by political developments as Peru and Chile elected left wing presidents. Mexico rounded off a strong year by rising a further 5% in the fourth quarter and taking gains for the year to 21%.

The weakness in equity markets stands in stark contrast to the positive trend seen in earnings revisions. Earnings estimates rose materially over the course of the year, up 43% and 21% for 2021 and 2022, respectively. The resultant derating has now taken the MSCI Latin America Index valuation to just 8x forward earnings, a 30% discount to the broader emerging markets to which it has historically traded at a small premium. It also doesn’t seem to reflect the higher levels of profitability, with the MSCI Latin America return on equity expected to remain above 20% over the next couple of years compared with 13-14% for emerging markets.

There is clearly a lot of negativity priced into regional equities. Primary concerns include an increasingly hawkish Federal Reserve, question marks over the trajectory of growth in China following, in particular, the pressure being applied to the real estate sector, tighter fiscal and monetary policy in the face of high levels of inflation, and what a political return to the left means for economic growth across the region. Despite this challenging backdrop, positive catalysts could take the form of evidence that the world can finally emerge from the pandemic, an easing of supply chain strains, stronger growth in China, and peaking in local and US inflation.

The Liontrust Latin America Fund returned -8.8% during the fourth quarter. From a stock perspective, the most significant detractors to performance over the quarter were Clear Sale, Pagseguro Digital and Sendas Distribuidora. From a regional standpoint, performance was hindered by our mid cap holdings in Brazil which suffered from a deterioration in the economic outlook for 2022 and outflows from equities as the higher yields available in fixed income markets became more attractive. These companies continue to generate returns well in excess of their cost of capital, compounding value for shareholders.

Discrete years' performance (%), to previous quarter-end:

 

Dec-21

Dec-20

Dec-19

Dec-18

Dec-17

Liontrust Latin America C Acc GBP

-16.1%

-18.1%

23.2%

3.8%

18.6%

MSCI EM Latin America

-7.2%

-16.5%

12.9%

-0.8%

13.0%

IA Latin America

-11.5%

-14.9%

15.4%

-3.3%

14.0%

Quartile

4

4

1

1

1

 

*Source: FE Analytics as at 31.12.21.

 

**Source: FE Analytics as at 31.12.21. Quartile rankings generated on 07.01.22

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Key Risks 
 
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested. The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
 
Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.  

 

Disclaimer
 
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 
 
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 

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