BlackRock Latin American (BRLA)

11/04/2022

Results analysis from Kepler Trust Intelligence

BlackRock Latin American Investment Trust (BRLA) has released its financial results for the year ending 31 December 2021. In USD terms, BRLA saw its NAV fall by 12.5% over the period, compared to an 8.1% drop in its benchmark, the MSCI EM Latin America Index. Those figures were 11.7% and 7.3% respectively in GBP terms.

However, since the period end the trust has performed well, generating returns of 31.4% compared to 33.8% for the index (to 31/03/2022) as Latin America has been one of the bright spots in world markets, buoyed by rising commodity prices. BRLA has been the top-performing investment trust in 2022 to date.

Managers Ed Kuczma and Sam Vecht are positive on the outlook for their region this year, pointing to increases in food and energy prices of which many countries in the region are major suppliers. They also highlight higher interest rates in the region which could attract capital flows as well as relative political and economic isolation from the consequences of the war in Ukraine.

Kepler View

There is no doubt that 2021 was a tough year for Latin American investors, but BlackRock Latin American (BRLA) was the top-performer in the investment trust sector in the first quarter of 2022 and looks ideally placed for a new economic environment.

In particular, Latin America should benefit from raw material price inflation as well as political tensions between the West and China and Russia. Rising commodities prices should benefit companies across the region, which has large supplies of oil, gas, copper, and lithium as well as agricultural commodities. Meanwhile the region is a potential alternative trading partner for the West.

We can already see some of these dynamics coming into play, as companies in Latin America now have the highest earnings momentum in emerging markets. Compounding this is the fact that countries in the region were quick to raise interest rates during the pandemic, making their currencies some of the best performers so far in 2022. In fact, over the past 4 weeks, consensus earnings were revised up by 14% in LatAm, led by Brazil and Chile. In Mexico and Peru, earnings were revised up by c. 5%.

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