The JPMorgan Latin America Fund – A (JLTAX) rose 4.6% in October 2015 from a month ago. In the three-month and six-month periods ended October 30, the fund fell 12.1% and 23.6%, respectively. In the YTD (year-to-date) period, the fund is down by 26.5%, while it fell 35% in the last one-year period. However, from the end of October until November 25, the fund is up 2.7%.
JLTAX’s performance has been quite poor. It has never ranked above sixth and for October, it was the second worst performer among the nine funds. Let’s look at the factors that contributed to this fund’s poor performance.
Portfolio composition and contribution to returns
JLTAX was launched in February 2007—before the global financial crisis took hold—allowing it to see at least one complete market cycle. According to its latest geographical disclosure, Brazil, Mexico, and Peru are the top three invested geographies, in that order, making up ~87% of the fund’s assets. Securities from Brazil and Mexico form ~82% of the portfolio.
Since the latest complete portfolio of the fund available is as of September 2015, we will consider that as our base. For October, we will consider valuation changes for our analysis. All portfolio percentages mentioned here refer to their weights according to changes in valuation from September to October.
Financials emerged as the biggest positive contributor to JLTAX’s returns for October 2015. Mexico’s Gentera S.A.B. de C.V. and Peru’s Credicorp Ltd. (BAP) contributed the most to the sector’s returns. However, a few stocks, led by First Cash Financial Services Inc., were detractors. Although the amount was not very large, they certainly chipped off some gains.
Industrials were led by Promotora y Operadora de Infraestructura SAB de CV, with Copa Holdings SA (CPA) and Embraer S.A. (ERJ) contributing as well. As with financials, a few detractors reduced the contribution from the sector.
Consumer staples rounded off the top three highest sectoral contributors. They were led by the sponsored ADR (American depository receipt) of Fomento Económico Mexicano, S.A.B de C.V. (FMX), and Gruma S.A.B. de CV (GMK).
Reasons for poor performance
JLTAX was hurt by the materials sector, which, unlike a lot of its peers, was a negative contributor. Suzano Papel e Celulose S.A. and the sponsored ADR of CEMEX, S.A.B. de C.V. (CX) drove the contribution from the sector down. Further, picks from the energy sector (UGP) (YPF) did not contribute much, although several of the fund’s peers benefited considerably by the contribution from the sector.
Plus, several detractors in most sectors chipped away at the positive contributions from other securities, reducing the fund’s returns.
Let’s move on to the BlackRock Latin America Fund – A (MDLTX) in the next article.