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How to Play Latin America as Its Emerging Markets Recover

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Part 4
How to Play Latin America as Its Emerging Markets Recover PART 4 OF 14

Hedge Funds Bagged 24.4% Return from Investing in Latin America

Latin America is the winner in emerging markets

Latin America reaped a 24.4% return for the year up to July 2016 for hedge funds invested in the region. Latin American investment has clearly been shining in hedge fund portfolios this year, especially for those invested in emerging markets (EEM) (VWO).

The HFRI Emerging Markets (Total) Index yielded 5.2% up to July 2016. The S&P 500 tracking the SPDR S&P 500 ETF (SPY) returned about 8.3% up to July 2016. The HFRI Emerging Markets: Latin America Index delivered a 24.4% return.

Hedge Funds Bagged 24.4% Return from Investing in Latin America

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With a 4.3% return for July and an 8.9% return in 2Q16, Latin America continued to lead the emerging market performance in July. It was followed by India’s HFRI Emerging Markets: India Index with a 3.8% return.

Latin American ETF has delivered a 34.5% return

Within the hedge fund universe, those funds invested in Latin America led hedge fund performance in the first half of this year. Of the $189.8 billion invested in emerging markets, Latin America commands about $5.9 billion, with Russia and Eastern Europe accounting for $26.6 billion.

Emerging Asia commands about $48.5 billion in hedge funds assets. The MENA (Middle East and North Africa) region has about $4 billion of hedge fund capital invested there.

Funds invested in Russia have been able to deliver 14.7% YTD (year-to-date) up to July. While the iShares Latin America 40 ETF (ILF) is definitely in the lead with a 34.5% return YTD as of August 23, 2016, the VanEck Vectors Russia ETF (RSX) isn’t far behind with a 27.2% return YTD. The iShares MSCI Emerging Markets (EEM), which has 4% of its portfolio invested in Russia and 7% in Brazil, has returned 14.8% during the period.

Next, let’s take a quick look at markets within Latin America. Where are the opportunities, and what should we avoid?

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