The Fidelity Advisor Latin America Fund Class A (FLFAX) fell by 8.6% in August 2015, from July 2015—the third least among the eight funds in this review. In the three-month period ending August 31, the fund was down by 16.4%, while in the six-month period, it was down by 21.4%.
In the YTD (year-to-date) period, FLFAX was down by 22.6%. Except the one-month period, the fund’s performance places it in the lower half of the eight funds we’re analyzing in this series. But let’s look at what helped the fund avoid bigger losses in August while keeping it in the lower half of the group during the periods under review.
Portfolio composition and contribution to returns
The FLFAX’s portfolio was focused on the financials, consumer staples, and telecom services sectors, with exposures of 27.6%, 26.2%, and 9.5%, respectively. The consumer discretionary sector followed these three core sectors, with an exposure of 8.4%.
Financials, consumer staples, and consumer discretionary were the top three negative sectoral contributors to returns in August 2015. Financial stocks were pulled down by the preferential shares of Itaú Unibanco Holding (ITUB). The distant biggest negative contributor to returns was BB Seguridade Participações, also a Brazil-based company.
Among consumer staples stocks, Brazilian Brewing Company Ambev (ABEV)—the biggest brewing company in Latin America—was the biggest negative contributor to returns in August 2015. The Brazilian food, general merchandise, and other products retailer Companhia Brasileira de Distribuicao (CBD) and the Brazilian wheat food products manufacturer M Dias Branco were among other stocks that dragged the performance of the sector down.
The consumer discretionary sector was pulled down by Mexico’s Consorcio ARA, Grupo Televisa (TV), and Brazil’s Multiplus.
How the fund reduced underperformance in August
FLFAX was concentrated on financials and consumer staples. Although both these sectors fell sharply in August 2015, the fund’s low exposure to consumer discretionary, energy, and materials stocks helped it reduce overall underperformance in August, because a higher exposure to these sectors would have dragged it even further down. Stock selections in these sectors hurt the fund in the longer term, however, and this showed on the fund’s trailing six-month and YTD (year-to-date) performances.
All the top sectoral picks of the fund—such as the preferential shares of Petroleo Brasileiro Petrobras (PBR) from the energy sector, Compañía de Minas Buenaventura (BVN) from the materials sector, and Companhia de Saneamento Basico do Estado de Sao Paulo (SBS) from the utilities sector—were major negative contributors, dragging down the fund’s longer-term performance.
In the next part of this series, we’ll look at the JPMorgan Latin America Fund Class A (JLTAX).