In August 2015, the JPMorgan Latin America Fund Class A (JLTAX) tanked by 10.5% from a month prior, making it the third-worst performance among the eight funds we’re analyzing in this series. In the three-month period ended August 31, the fund was down by 16.9%, while in the six-month period, it was down by 22.7%. In the YTD (year-to-date) period, the fund was down by 25.1%. In the six-month and YTD periods, the fund was the second-worst performer among the eight funds we’re analyzing in this series.
Now let’s look at what has led to JLTAX’s weak numbers for all periods under review.
Portfolio composition and contribution to returns
JLTAX’s portfolio focused on the financials, industrials, and consumer staples sectors, with exposures of 36.0%, 20.8%, and 16.7%, respectively. The consumer discretionary sector was a distant fourth place, with an exposure of 7.5%.
Financials, industrials, and consumer discretionary were the top three negative sectoral contributors to returns for August. Brazil’s Banco Bradesco (BBD) was the biggest drag on the sector, outpacing other decliners by a significant margin. Peru’s financial holding company Credicorp (BAP), Brazil’s BB Seguridade Participações, and Mexico’s stock exchange, the Bolsa Mexicana de Valores, also pushed the performance of the financial sector into negative territory for August 2015.
The industrials sector was led down by Copa Holdings (CPA), which operates passenger and cargo services via its subsidiaries Copa Airlines and Copa Airlines Colombia. Brazil’s WEG and Localiza, a rental car company, were among the other major negative contributors to returns from the industrials sector.
The consumer discretionary sector contributed more negatively to returns in August than the consumer staples sector—even though its exposure was less than that of consumer staples stocks. Brazil’s department store clothing company Lojas Renner and education services provider Estacio Participacoes led the consumer discretionary sector down. Meanwhile, Ambev (ABEV) led the consumer staples sector down.
What resulted in sharp negative returns?
JLTAX’s allocation towards financial and industrials stocks proved to be detrimental in August 2015, with both these sectors underperforming. It would have witnessed a further fall in returns if the consumer discretionary sector had formed a larger chunk of the portfolio. We might also note that since fund managers emphasize bottom-up stock picking under a framework of macro research, underperformance of the fund’s top stocks picks—with quite a substantial exposure to stocks from Brazil—worsened the fund’s negative returns.
In the next part of this series, we’ll look at the BlackRock Latin America Inv A (MDLTX).