The BlackRock Latin America Fund A (MDLTX) was down 2.4% in November 2015 from a month prior. In the three- and six-month periods ended November 30, the fund fell 5.8% and 19.9%, respectively. In the one-year period, it fell 33.6%, and from November’s end until December 24, the fund fell 3.9%. In the YTD (year-to-date) period, the one we’ll be analyzing, the fund has returned -26.8%.
The fund was the third-best performer for November. However, it stood fifth among the eight funds under review for the YTD period. Let’s look at what has contributed to this fund’s below-average performance.
Portfolio composition and contribution to returns
MDLTX has the longest track record among the funds in this review. It was launched in September 1991. According to its latest geographical disclosure, Brazil, Mexico, and Peru are its top three invested geographies, in that order, making up 92.2% of its assets.
Since the latest complete portfolio of the fund available with us is as of October 2015, we’ll consider that to be our base. For November, we will consider valuation changes for our analysis. All portfolio percentages mentioned from here on refer to their weights as per changes in valuation from October to November.
The financials sector accounted for the lion’s share of MDLTX’s negative returns for the YTD period ended November 2015. Banco Bradesco (BBDO) was the primary negative contributor. Sizable contributions were made from the sponsored ADRs (American depositary receipts) of Itau Unibanco Holding (ITUB), BB Seguridade Participações and Credicorp (BAP).
The materials sector, which emerged as the second-biggest negative contributor for the period, was led down by Cemex (CX). Compañía de Minas Buenaventura (BVA) and Vale (VALE), among others, also led the sector down. However, some of the drag was reduced by positive contributions from the regular shares and the sponsored ADR of Fibria Celulose (FBR).
Kroton Educacional and Grupo Televisa (TV) led the consumer discretionary sector down. BRF (BRFS) had quite a large negative impact on the consumer staples sector, and America Movil (AMX) and Telefônica Brasil (VIV) drove the telecom services sector into negative territory.
Reasons for below average performance
The top three sectors of the fund were quite detrimental to its returns for the YTD period ended November 2015. However, a few stocks from most sectors except financials were able to reduce some of the drag on the fund, thus leading to a slightly below average performance compared to its peers in the period.
Let’s move on to the T. Rowe Price Latin America Fund (PRLAX) in the next article.