Performance evaluation

The Deutsche Latin America Equity Fund Class A (SLANX) fell 3.4% in November 2015 from a month prior. In the three- and six-month periods ended November 30, the fund fell 5.1% and 22.8%, respectively. In the one-year period, it fell 35.2%, and from November’s end until December 24, the fund fell 3.8%. In the YTD (year-to-date) period, the one we’d be analyzing, the fund has returned -28.9%.

The fund has been a below-average performer for all periods under review. It stood seventh among the eight funds under review for the YTD period. Let’s look at what has contributed to this fund’s performance.

Financials, Staples Pummel SLANX Year-to-Date in November 2015

Portfolio composition and contribution to returns

SLANX has the third-longest track record among the funds in this review. It was launched in May 2001. According to its latest geographical disclosure, Brazil, Mexico, and Chile are its top three invested geographies, in that order, making up ~80% of its assets. Note that 55% of the fund’s assets are invested in Brazil.

Since the latest complete portfolio of the fund available is as of September 2015, we’ll consider that our base. For November, we’ll consider valuation changes for our analysis. All portfolio percentages mentioned from here on refer to their weights as per changes in valuation from September to November.

Financials led all sectors in terms of contributing negatively to the fund’s returns for the YTD period ended November 2015. The preference shares of Itau Unibanco Holding (ITUB) and Banco Bradesco (BBDO) were neck-and-neck in negative contributions for the period. Grupo Financiero Galicia (GGAL) emerged as the highest positive contributor among the sector’s holdings and, along with BBVA Banco Francés (BFR), reduced the drag substantially.

The consumer staples sector was driven down by negative contributions from the preference shares of Companhia Brasileira de Distribuicao (CBD), with BRF (BRFS) contributing substantially as well. Other negative contributors included Chilean retailer Cencosud (CNCO) and Coca-Cola FEMSA (KOF). There was some support to the sector as sponsored ADRs (American depositary receipts) of Anheuser-Busch (BUD) and Fomento Económico Mexicano (FMX) reduced negative returns a bit.

Reasons for performance

With close to 70% of its assets invested in the consumer staples and financials sectors, the fate of SLANX lies with how these two sectors fare. Even though these sectors had help from stocks such as GGAL and BUD, negative contributions from other stocks were just too much to deal with. Hence, the fund had a forgettable 2015.

We’ll look at the last fund in our review, the ProFunds UltraLatin America Class A (UBPIX), in the next article.

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