In this part, we’ll be looking at the Deutsche Latin America Equity Fund – Class A (SLANX). It’s the third largest fund in this review. It was managing assets worth $197.3 million as of February 2016. As of December 2015, its assets were spread across 46 holdings and included stocks of companies such as Empresa Nacional de Electricidad (EOC), Cencosud (CNCO), CorpBanca (BCA), Embotelladora Andina (AKO.B), and BBVA Banco Francés (BFR).
From a purely NAV (net asset value) return standpoint, SLANX was an above-average performer for the one-year period until March 24, 2016. It ranked fourth for the period among its peer group. 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).
SLANX’s standard deviation, or the volatility of returns, in the one-year period until March 24, 2016, was 26.4%. 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. For 2016 YTD (year-to-date), the ratio was positive and placed SLANX first among its peer group. Its risk-adjusted returns were much higher than that generated by the MSCI EM Latin America Gross Return USD Index.
The information ratio, calculated with the MSCI EM Latin America Gross Return USD Index as the benchmark, was 0.73 for the one-year period ended March 24, ranking it third 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 the second best among its peers.
LANX generated the third-highest alpha among its peers for the one-year period ended March 24, 2016. The latest surge in Brazilian equities has been positive for the fund, as it generated the highest alpha in 2016 YTD. Its volatility is higher than the peer average, but so far, it has been rewarding its investors well. Investors can stay invested in the fund, but if they have a short-term investment horizon, they may want to consider reallocating their holdings to some other market.
In the next article, we’ll look at the UltraLatin America ProFund – Class A (UBPIX).