Liontrust Latin America Fund

H1 2020 review

The Liontrust Latin America Fund returned -30.2% in the first half of the year, versus the MSCI EM Latin America Index return of -30.6%*.

The first quarter of 2020 brought an end to the post-GFC bull market in developed market equities. With the surging USD, emerging markets have had a particularly tough time and Latin America has not been spared. The acute stage of the coronavirus panic and market selloff began on February 23rd, when Italy reported an outbreak in its northern regions. At this point it became clear that the virus was not a regional concern but a global pandemic. The ensuing collapse of the OPEC+ talks sent oil prices down to $30/bbl which put further pressure on global equities. Fuelled in no small part by large-scale fiscal and monetary stimulus, global markets recovered during the second quarter with developed markets erasing the first quarter losses. The divergence between developed and emerging market returns can be at least partially attributed to the major developed economies putting together notably larger stimulus packages compared with the major emerging markets.

After falling by 42% during the first quarter, Latin American equities rallied by 20% during the second quarter but still ended the first half of the year down 30.6%. Even as cases continued to rise across the region, the gradual reopening of the global economy supported a recovery in markets during the second quarter. Ahead of this crisis, one of the major attractions to Brazil was that it was at a very different stage in the cycle – following its recession in 2015/16 it was in the early stages of recovery. This formed one of the three key pillars to the investment case, along with an unprecedented reform drive and low rates supporting rotation from fixed income into equities. The latter two pillars remain in place, while the nascent economic recovery has been interrupted by the coronavirus outbreak. Indeed, the current crisis may even accelerate reforms as the government expedites privatisations to fund the crisis response. This certainly seems to be the case with the passage of the sanitation reform in June and Bolsonaro’s efforts to form closer ties with the centrist parties indicates an improved relationship between the government and Congress. The sanitation reform will stimulate investment in water and sanitation services and allow for the privatisation of water utilities. Privatisations will help the government to fund the emergency spending measures implemented to battle the crisis, and Economy Minister Guedes remains committed to broad privatisations across many sectors.

Chile is one of the major beneficiaries of a lower oil price as they import 100% of their consumption. While a collapsing oil price initially sends shock waves through global markets as the shorter term impacts are fiscal pressures for oil exporters, the medium term benefits will be material. We used the weakness in Chile that began with the social unrest in October 2019, and was exacerbated by the current crisis, to add two new positions to the portfolio, having previously had no holdings in Chile.

The Liontrust Latin America Fund returned -30.2% during the first half. Key positive contributions came from e-commerce players Mercadolibre and Magazine Luiza, which was offset by weakness in Mexican banks.

The coronavirus hit Latin America later than many parts of the world and cases in the region are still rising, although they appear to be decelerating and are expected to peak over the next month or two. A key challenge will be to manage the reopening of the economies while keeping the number of cases under control.

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








Liontrust Latin America C Acc GBP






MSCI EM Latin America







*Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested). Non fund-related return data sourced from Bloomberg.


**Source: Financial Express, as at 30.06.20, total return (net of fees and income reinvested), primary class.


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Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. 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.


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Thursday, July 16, 2020, 3:28 PM