Performance evaluation of the Fidelity Advisor Latin America Fund
The Fidelity Advisor Latin America Fund Class A (FLFAX) has been a below average performer year-to-date (or YTD) among the group of seven funds chosen for this review. It has placed fifth in both the YTD period and the one-year period.
We’ve graphed its performance against the iShares Latin America 40 ETF (ILF) to give a comparison between it and a passive fund. Let’s look at what’s contributed to FLFAX’s below average performance so far in 2016.
Contribution to returns
Financials stocks have by far been the biggest positive contributors to FLFAX’s returns YTD as of August’s end. The preference shares of Itaú Unibanco Holding (ITUB) have been mainly responsible for leading the sector’s contributions up. ITUB has had help from Credicorp (BAP) and BB Seguridade Participações. However, a few stocks such as Grupo Financiero Inbursa and Credito Real have dragged on the sector.
Stock picks from the consumer discretionary sector have been sizable contributors to FLFAX’s returns as well. The sector has been led by Kroton Educacional, with CVC Brasil Operadora e Agência de Viagens and Smiles playing important supporting roles. Meanwhile, industrials have been helped up by Localiza, CCR, and Copa Holdings (CPA).
On the other end of the spectrum is the materials sector, which has made a sizable negative contribution to the fund. Fibria Celulose (FBR) has been the fund’s leading detractor, with help from Vale’s (VALE) preference and common shares. Monsanto Company (MON) has made a small positive contribution to the sector.
Alone, FLFAX’s performance has been quite good. However, a look at the graph above will show you that the fund has been unable to beat the performance of the passively managed ILF. Its stock picks from the consumer discretionary sector have been impeccable, but its financials picks have disappointed.
Though its average exposure to financials in 2016 has been a bit higher than ILF’s, the amount of contribution from the sector has been much lower compared to ILF’s stocks.
It’s important to note that the fund’s current manager took up responsibility for the fund barely ten months ago, and he needs time to show the impact of his management style on the fund. If you’ve recently invested in the fund, it could be prudent to stay invested and let the manager ride out the Michel Temer presidency.
Let’s move on to the JPMorgan Latin America Fund Class A (JLTAX) in the next article.