Latin Finance - July/August 2011 - 18

equity fund manager survey

real estate (BR Properties). Patrice Lemonnier, head of emerging market equities at Amundi with $745 million under management, notes that LatAm valuations are in line with the rest of EM, but Brazil is among the cheapest. Its market trades at an average 10x earnings, compared to 16x for Chile. Colombia should offer interesting possibilities, though Mexico and Peru bring too much political uncertainty, Lemonnier says. The Amundi LatAm fund returned 2.4% during the last three years up to May 31, 2011.

Andean Play

Brazilian shoppers are still generating most of the headlines, but investors have been optimistic about prospects away from LatAm’s largest market. The Chilean market in particular has offered investors an increasing array of offerings, even for those interested in something other than the salmon sector, which has seen three IPOs in 2011 alone. Though the election of Humala in June might not be what investors wanted, the integration of the Peruvian, Chilean and

Colombian exchanges, known as Mercado Integrado Latinamericano (MILA), also promises to bring more liquidity and hence more listings. “Some of this IPO activity is all about this integration,” says Stacy Steimel, portfolio manager at PineBridge Investments. Her LatAm Small and Mid Cap Equity fund has $334 million under management and is among the top performers in the region over the last three years, returning 11.6%. The fund is about 50%-55% allocated to Brazil, and is focused on $100 million-$2 billion market cap stocks. Steimel likens the potential in MILA to the creation of the Novo Mercado which pushed the total market cap of listed companies in Brazil to $1.3 trillion from $370 billion and greatly increased the number of listed companies, resulting in the flush issuing conditions seen today. PineBridge’s fund is largely focused on the boom in domestic consumption, and Steimel explains there is potential for more of this type of opportunity outside of Brazil. As with Brazilian names, though, investors must look carefully

for choice offerings within this theme. Pharmaceutical company CF Recalcine’s recent IPO in Chile is a good example of what Steimel describes as a low-valuation family business opening up to the markets. Also in Chile’s health sector, clinic operator Cruz Blanca raised $234 million equivalent in late June. Health companies are expected to offer new plays on middleincome growth in several countries. A follow-on for Mexican clinic operator Medica Sur is also in the pipeline. Ideally, the creation of MILA would break down the binary BrazilMexico dynamic that has historically characterized LatAm equities, and increase opportunities in Chile, Colombia and Peru, Steimel explains. The deal had been set to conclude by the end of the year, and would create the third-biggest exchange in LatAm after Brazil and Mexico. A pick-up in volumes will very much depend on whether regulators will allow pension funds to increase their holdings of international stocks or count issuers from other MILA countries as part of their domestic limits. Yet political risks have already slowed

Top LatAm Equity Funds over Three Years to May 31 2011
Chile, small caps on top Benchmark MSCI EM Latin America Lipper Latin American Funds Classification Average Manager iShares Pinebridge Global Funds Fidelity Amundi Funds iShares Templeton BGF BlackRock iShares Nordea
Source: Lipper

Launch

Fund Value ($m)

Allocation LatAm (%)

Annualized Growth Return (%) 1 yr 3 yr 5 yr 22.50 31.43 -1.60 -0.90 17.80 16.40

Fund MSCI Chile Investable Market Index Lat Am Small and Mid Cap Equity Latin America Latin America Equities MSCI Mexico Investable Market Index Latin America Latin American Fund Latin America Fund MSCI EM Latin America Latinamerikafond 2007 2007 1994 1994 1996 1991 1997 1991 2007 1997 919.80 333.70 2,177.80 746.50 1,6194.20 1,887.30 6,988.80 554.10 352.80 237.20 99.90 90.60 94.00 98.20 99.80 90.30 92.90 93.40 96.60 96.30 42.50 42.90 30.50 29.00 29.00 25.40 27.90 29.80 27.00 27.90 17.40 11.60 3.70 2.40 2.00 1.00 0.70 0.40 0.40 0.30 N/A N/A 18.80 21.70 13.80 19.80 18.10 19.10 N/A 17.80

18 LatinFinance

July/August 2011

Latin Finance - July/August 2011

Table of Contents for the Digital Edition of Latin Finance - July/August 2011