The BlackRock Latin America Fund – A (MDLTX) fell 5.2% in December 2015 from a month prior. In the three- and six-month periods ended December 31, the fund fell 4.0% and 24.6%, respectively. In the one-year period, the one we’ll be analyzing, it dived by 30.6%. Meanwhile, from the end of December to January 25, the fund fell by 11.4%.
For 2015, the fund ranked fifth among the eight funds in this review. Let’s look at what contributed to this fund’s below-average performance.
Portfolio composition and contribution to returns
Launched way back in September 1991, MDLTX has the longest track record among the funds in this review. According to its latest geographical disclosure, Brazil, Mexico, and Peru are the top three geographies it invests in, in that order, making up 94% of the fund’s assets.
Since the latest complete portfolio of the fund available is from November 2015, we’ll consider that as our base. For December, we’ll consider valuation changes for our analysis. All portfolio percentages mentioned from here on refer to weights according to changes in valuation from November to December.
Financials were the biggest negative contributors to the fund in 2015. They were led down by the ADR (American depositary receipt) of Banco Bradesco (BBDO) and the sponsored ADR of Itaú Unibanco Holding (ITUB), in that order. BB Seguridade Participações and Credicorp (BAP) also contributed sizably to the fund’s poor performance.
A comparatively large exposure to materials was also detrimental to the fund. CEMEX (CX) contributed the lion’s share of the sector’s returns. Distant, yet sizable negative contributors included Compañía de Minas Buenaventura (BVA) and Vale (VALE). Any further fall of returns from the sector was averted by positive contributions from the regular shares and the sponsored ADR of Fibria Celulose (FBR).
The ADR of BRF (BRFS) had quite a large negative impact on the consumer staples sector. However, there was support from Wal-Mart de Mexico and Fomento Económico Mexicano (FMX). Meanwhile, Kroton Educacional and Grupo Televisa (TV) led the consumer discretionary sector down, and America Movil (AMX) and the preference shares of Telefônica Brasil (VIV) drove the telecom services sector into negative territory.
Reasons for the below-average performance
The top three sectors of MDLTX turned out to be the top three negative contributors to returns. However, because of a few stock picks, the fund was able to reduce its negative returns and place fifth among eight funds. We’ll discuss the T. Rowe Price Latin America Fund (PRLAX) in the next article.