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Bradesco Latin American Equity Fund: Should We Be Vigilant?

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Updated

Fund overview

Let’s take a look now at the Bradesco Latin American Equity Fund – Retail Class (BDERX). It was managing assets worth $10.8 million as of February 2016. In December 2015, its assets were spread across 51 stock holdings and included stocks of companies such as America Movil (AMX), Petrobras (PBR), Grupo Aeroportuario del Sureste (ASR), BRF (BRFS), and Ultrapar (UGP).

 

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Fund performance

From a purely NAV (net asset value) return standpoint, BDERX was a below-average performer for the one-year period until March 24, 2016. It’s fifth for the period among the peer group of nine funds we’ve chosen for this review. For return comparison, we’ve chosen two ETFs: the iShares Latin America 40 ETF (ILF) and the iShares MSCI Emerging Markets Latin America ETF (EEML).

Other metrics

BDERX’s standard deviation, or the volatility of returns, in the one-year period until March 24, 2016, was 24.1%. This is lower than both the MSCI EM Latin America Gross Return USD Index’s 27.7% and 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. But for 2016 YTD (year-to-date), the ratio was positive and placed BDERX sixth among our peer group. But its risk-adjusted returns were lower than that 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 0.1 for the one-year period ended March 24, ranking it fourth 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 was negative.

Investor takeaways

BDERX was unable to generate risk-adjusted returns higher than the benchmark used in this review. A negative information ratio doesn’t reflect well on the fund. Apart from that, the fund’s alpha has been below average in 2016 YTD. The fund’s metrics for the one-year period ended March 24 placed it as an above-average performer. But a comparatively poor showing in 2016 has been dragging on the fund. Investors invested in this fund need to be vigilant about the performance of the fund going forward.

In the next part, we’ll look at the Epiphany FFV Latin America Fund – Class A (ELAAX).

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