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Aberdeen Latin American Equity Fund: Not an Amazing 2016 YTD

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Updated

Fund overview

In this part of the series, we’ll be looking at the Aberdeen Latin American Equity Fund – Class A (ALEAX). It’s the smallest fund in this review with assets worth $2.6 million under management as of February 2016. As of that date, its assets were spread across 39 holdings and included stocks of companies such as Embotelladora Andina (AKO.A), Banco Santander-Chile (BSAC), Tenaris (TS), Bancolombia (CIB), and Grupo Financiero Santander Mexico (BSMX).

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Fund performance

From a purely NAV (net asset value) return standpoint, ALEAX has done better than all but one member of its peer group in the one-year period until March 24, 2016. The peer group here is the nine funds chosen for this review. For return comparison, we have selected two ETFs: the iShares Latin America 40 ETF (ILF) and the iShares MSCI Emerging Markets Latin America ETF (EEML).

Other metrics

ALEAX’s standard deviation, or the volatility of returns, in the one-year period until March 24, 2016, was 26.3%. This is lower than the MSCI EM Latin America Gross Return USD Index’s 27.7% but higher than the peer group’s average of 25.2%.

The fund’s risk-adjusted returns, calculated by the Sharpe Ratio, were negative for the one-year period ended March 24. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that. However, for 2016 YTD (year-to-date), the ratio was positive and placed ALEAX third among its peer group. Its risk-adjusted returns were better than what was generated by the MSCI EM Latin America Gross Return USD Index.

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The information ratio, calculated with the MSCI EM Latin America Gross Return USD Index as the benchmark, was 1.0 for the one-year period ended March 24. It was the second best among all the funds in this review. The information ratio shows the consistency of a fund manager along with measuring his or her ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. For 2016 YTD, the fund’s information ratio ranked fourth among its peers.

Investor takeaways

ALEAX’s alpha was second for the one-year period ended March 24. However, the same metric placed it fourth in the 2016 YTD period. Along with the other information we’ve already covered, this shows that the fund’s consistency of returns and alpha generation have suffered a bit in 2016. However, investors in this fund with a long-term view may want to stay invested and see how 2016 pans out.

In the next part of this series, we’ll look at the Bradesco Latin American Equity Fund – Retail Class (BDERX).

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