We’ll be analyzing the BlackRock Latin America Fund A (MDLTX) in this article. The BlackRock Latin America Fund was managing assets worth $134.0 million as of January 2016.
As of December 2015, its assets were spread across 60 holdings and included companies such as Banco Bradesco (BBDO), BRF (BRFS), Southern Copper (SCCO), Telefônica Brasil (VIV), and Petrobras (PBR), which composed a combined 13.0% of the fund’s portfolio.
From a purely net asset value return standpoint, MDLTX had a below-average one-year period until February 17, 2016, and an average 2015. It ranked seventh and fifth, respectively, for these periods among its peer group.[1. When we refer to the peer group, we mean the group of nine funds chosen for this review.]
For return comparison, we have chosen two ETFs: The iShares Latin America 40 ETF (ILF) and the iShares MSCI Emerging Markets Latin America ETF (EEML).
MDLTX’s standard deviation, or the volatility of its returns, in the one-year period until February 17 is 23.6%. This is lower than the MSCI EM Latin America Gross Return USD Index’s 25.7% and equivalent to the peer average of 23.6%.
The fund’s risk-adjusted returns, calculated via the Sharpe Ratio, were negative for both the one-year period ended February 17 as well as for 2015. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid it.
The fund’s information ratio, calculated with the MSCI EM Latin America Gross Return USD Index as the benchmark, was 0.2 for the one-year period ended February 17, placing it among the bottom three in its peer group.[2. The information ratio shows the consistency of a fund manager along with the measurement of his ability to generate excess returns over a benchmark. The higher the reading, the better the consistency.] For 2015 as well, the fund’s information ratio was able to place it only among the bottom three funds.
A note to investors
Apart from MDLTX’s information ratio, its alphas for both the one-year period ended February 17 and for 2015 ranked it among the bottom three funds. Year-to-date 2016 has been unrelenting on the fund as its volatility has been the second highest among the funds in this review.
All these factors do not make the offering look appetizing. When conditions in Latin America turn favorable, investors would do well to see the performance of the fund across market cycles. It should help them to determine whether or not the fund should make their shortlists.
In the next article, we’ll look at the T. Rowe Price Latin America Fund (PRLAX).