Discretionary and Industrials Fire for ALEAX


Nov. 20 2020, Updated 11:58 a.m. ET

Performance evaluation of the Aberdeen Latin American Equity Fund

The Aberdeen Latin American Equity Fund Class A (ALEAX) surged 27.7% in the first four months of 2016, making it the second-best performer among the eight funds in this review. In the past year, the fund has fallen 6.9%, the least among its peers.

Meanwhile, from December’s end until May 6, 2016, the fund rose 22.7%. We have graphed its performance against two ETFs: the iShares Latin America 40 ETF (ILF) and the iShares MSCI Emerging Markets Latin America ETF (EEML). Let’s look at what has contributed to the superior performance of the fund in the first part of 2016.

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Portfolio composition and contribution to returns

Financials contributed half of ALEAX’s total returns in the first four months of 2016. The preference shares of Banco Bradesco (BBD) were the single biggest contributors from the sector, followed by Multiplan Empreendimentos Imobiliários.

Itaú Unibanco Holding (ITUB), and BM&FBOVESPA were also major positive contributors. There was no negative contributor from the financials sector.

Though financials emerged as the biggest positive contributors, picks from the consumer discretionary sector really powered the fund ahead. The sector, which formed 11% of the fund’s assets, emerged as the second biggest contributor to its returns for the period. The sector was led by Lojas Renner, with Arezzo Industria e Comercio also playing a major role.

Industrials did better than consumer staples in terms of positive contributions. Graña y Montero (GRAM) was the star performer from the sector, with Grupo Aeroportuario del Centro Norte (OMAB) and Localiza helping the sector up.

Investor takeaway

ALEAX lagged ILF in terms of point-to-point returns in the first part of 2016. However, it fared better than the passively managed fund in terms of total returns. Its picks from the energy, information technology, and materials sectors underperformed the respective composition of ILF.

Though it did better than ILF in all other sectors, ALEAX’s picks from the consumer discretionary and industrials sectors were primarily responsible for its strong showing in the period.

The fund’s superior performance in 2016 so far does not make it an automatic choice for your portfolio. A longer-term evaluation is necessary. However, its low turnover is a positive attribute and has worked in its favor this year so far.

Now, let’s look at the second fund in this review, the Epiphany FFV Latin America Fund Class A (ELAAX).


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