Latin Finance - July/August 2010 - 11

equity/debt fund performance

that credit market volatility undermines the global economy to a degree that LatAm is fundamentally impacted.

Taking Advantage

As rough as the ride down was, there were tremendous gains from late March 2009 to mid-April 2010. The Lipper average of LatAm equity funds rallied 117% on a gross return basis in the 12 months to April 1, topping a 98% leap in the MSCI index, according to Lipper. Its EM bond average also outperformed, returning 39% in that period, beating a 30% rise in JPMorgan’s EMBI Global Diversified benchmark. The region also performed well versus developed world milestones. Lipper’s US Diversified Equity Funds index returned 52% in the 12 months to April 1 on a cumulative total reinvested basis, according to Lipper. Its European regional index returned 57%. Lipper’s US fixed income fund average – which includes high-yield – meanwhile yielded 28% on a cumulative total reinvested basis for the 12 months to April 1. A world bond average made 23% in that period, and a short and intermediate US government funds average gave just 5%. Kutas notes that at the start of June, the MSCI LatAm index was down about 22% on the year, which by his calculations is near the average size – 26% – of the region’s previous corrections in last 20 years. There have also been four major corrections of near 50% in the last 20 years, on average lasting 58 weeks. “If you’re really bearish, you could get more worried, otherwise the correction we’re having now is actually fairly standard,” he says. “These are the best opportunities to add to positions of good companies or companies that you’ve been watching where risk-reward now shifts in to your favor,” says Kutas, whose Fidelity fund made 113% in the 12 months to April 1. He adds that there is opportunity from distressed sellers who are less concerned by price than a need to exit. Dedicated investors have the upper hand in this scenario. John Carlson, manager of Fidelity’s $3.3 billion New Markets Income Fund

(NMIF) says he expects that spreads will finish 2010 more or less where they started the year, meaning earning about 7% across his fund from coupon clipping. NMIF returned 43% in the year to April 1. Carlson notes that he keeps a “healthy” level of cash on hand to pick up favored credits, for example the Brazilian and Colombian sovereigns, when others panic. “I don’t believe this is over until we see capitulation, and I don’t believe we’re there yet,” says Carlson, speaking late-May. Analysts detect technical support for the Bovespa at 60,000-62,000 and for the Mexican Bolsa at 30,000-31,500. Calling

“We went in to 2009 with a mindset that there was nothing broken in Latin America necessarily.” says Will Landers, manager of BlackRock’s $8.5 billion LatAm equity funds
support for the EMBI Global (EMBIG) is a bit trickier, as bond spreads gyrate on headline risk, but analysts estimate it in the high 300s to mid 400s. Mid-June, the EMBIG was at 340 basis points, Bovespa at 63,800 and Mexico’s IPC around 32,350. “Given our view on the global growth front, we think there is little downside from current levels,” says Roberto Melzi, senior EM strategist at Barclays. “It appears that a lot of negative news has been reflected in asset prices,” he adds.

Stars Align

Dedicated equity and debt fund managers say they have been buying weakness for some time. “We went in to 2009 with a

July/August 2010

LatinFinance 11



Latin Finance - July/August 2010

Table of Contents for the Digital Edition of Latin Finance - July/August 2010

Latin Finance - July/August 2010
Contents
Equity/Debt Fund Performance
European Investors
Brazil Domestic Buyside
Mexican Domestic Buyside
Mexico Venture Capital
CEMEX CFO Interview
Panama Investment
Canadian Miners
Peru Investor Report
Peru is Making Strides to Develop Gas and Oil
Microfinance Volume Rises at a Steady Clip
Latin Finance - July/August 2010 - Latin Finance - July/August 2010
Latin Finance - July/August 2010 - Cover2
Latin Finance - July/August 2010 - Contents
Latin Finance - July/August 2010 - 2
Latin Finance - July/August 2010 - 3
Latin Finance - July/August 2010 - 4
Latin Finance - July/August 2010 - 5
Latin Finance - July/August 2010 - 6
Latin Finance - July/August 2010 - 7
Latin Finance - July/August 2010 - 8
Latin Finance - July/August 2010 - 9
Latin Finance - July/August 2010 - Equity/Debt Fund Performance
Latin Finance - July/August 2010 - 11
Latin Finance - July/August 2010 - 12
Latin Finance - July/August 2010 - 13
Latin Finance - July/August 2010 - 14
Latin Finance - July/August 2010 - 15
Latin Finance - July/August 2010 - 16
Latin Finance - July/August 2010 - European Investors
Latin Finance - July/August 2010 - 18
Latin Finance - July/August 2010 - Brazil Domestic Buyside
Latin Finance - July/August 2010 - 20
Latin Finance - July/August 2010 - 21
Latin Finance - July/August 2010 - 22
Latin Finance - July/August 2010 - 23
Latin Finance - July/August 2010 - 24
Latin Finance - July/August 2010 - 25
Latin Finance - July/August 2010 - Mexican Domestic Buyside
Latin Finance - July/August 2010 - 27
Latin Finance - July/August 2010 - 28
Latin Finance - July/August 2010 - Mexico Venture Capital
Latin Finance - July/August 2010 - 30
Latin Finance - July/August 2010 - CEMEX CFO Interview
Latin Finance - July/August 2010 - 32
Latin Finance - July/August 2010 - 33
Latin Finance - July/August 2010 - Panama Investment
Latin Finance - July/August 2010 - 35
Latin Finance - July/August 2010 - 36
Latin Finance - July/August 2010 - 37
Latin Finance - July/August 2010 - 38
Latin Finance - July/August 2010 - Canadian Miners
Latin Finance - July/August 2010 - 40
Latin Finance - July/August 2010 - 41
Latin Finance - July/August 2010 - Peru Investor Report
Latin Finance - July/August 2010 - 43
Latin Finance - July/August 2010 - 44
Latin Finance - July/August 2010 - Peru is Making Strides to Develop Gas and Oil
Latin Finance - July/August 2010 - Microfinance Volume Rises at a Steady Clip
Latin Finance - July/August 2010 - 47
Latin Finance - July/August 2010 - 48
Latin Finance - July/August 2010 - Cover3
Latin Finance - July/August 2010 - Cover4
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