BlackRock Latin American
06/04/2021
Results analysis from Kepler Trust Intelligence
· Last week, BlackRock Latin American (BRLA) released their annual results for the financial year ending 31 December 2020. Over the year the NAV fell by 14.5% in US Dollar terms, compared to a fall in the benchmark of 13.8%. In Sterling terms, the NAV fell by 17.2% and the benchmark fell by 16.2%. The share price fell by 9.3% in US Dollar terms and 12.1% in Sterling terms.
· While Latin America was hit hard by the impact of the pandemic, it performed very strongly in the final quarter as markets rebounded. In fact, November saw the region's markets record their best monthly performance in decades as optimism about vaccines swept markets.
· The trust has continued to pay a dividend of 1.25% of USD NAV each quarter, the board using its ability to make contributions from capital to make up any shortfall in the revenue account.
Kepler view
We think Latin American equity markets could be very interesting at this point in the cycle, with the world hopefully seeing a recovery from the pandemic through the rest of 2021. The region has a high exposure to cyclical materials and energy companies which could do well as global demand returns, as has been seen in the global reflationary rally since last autumn.
Since taking over the trust in early 2019 Sam and Ed have employed a more active approach to managing the portfolio, evident in a more concentrated number of holdings and use of gearing, which makes it more likely stock selection will drive returns and we think creates a more attractive long-run proposition. The portfolio is currently tilted towards companies Ed and Sam believe will benefit from higher external growth from the US and China, buoyant commodity prices and liquidity from accommodative monetary and fiscal policy in developed markets.
BRLA is the only trust investing purely in the equities of Latin America. The trust is trading on a discount of 6.9% which, given the low valuations in the regions and the tailwinds towards commodities, we believe could offer a potentially attractive entry point.
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