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Latin America - Time to step up?

Latin America has something big up its sleeve.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Latin America has something big up its sleeve.

A vibrant, youthful and rapidly growing workforce. By 2030, the working age population is expected to be 18% higher than in 2015. That’s almost one new worker for every five today.

It’s also home to a growing, increasingly wealthy middle class, spending more money. They’re demanding better infrastructure, and fuelling demand for consumer goods.

In the short term, economic growth prospects are steady across most of Latin America, with annual GDP growth set for 2% from 2020. Forecasts have been helped by the region's trade body, Mercosur, signing a comprehensive trade deal with the European Union which should lift tariffs on 92% of its exports over the next 10 years.

And the new pro-business Brazilian government has brought a renewed feeling of optimism that Brazil can make some real economic progress. As the region’s biggest economy, it would be most welcome.

Some clouds still remain

While long-term prospects look attractive, there are still challenges. And as with all emerging markets, volatility could be here to stay.

The current low-growth environment in developed markets is hurting Latin American exporters who are faced with lower demand for their products as well as weak commodity prices.

There’s also rising political uncertainty in Argentina. The country’s received support from the International Monetary Fund to stabilise their economy but remains in recession. With sky-high inflation and deeply unpopular austerity measures in place, its mounting problems aren’t likely to disappear anytime soon.

Should I invest in Latin America?

An investment in Latin America over the last two decades has rewarded investors with a return of 776.3%.

That’s more than both the broader emerging markets index, which returned 528.4%, and the global index which returned 291.7%*. Remember past performance isn’t a guide to future returns.

Those returns haven’t come in a straight line though. You’d have seen steep falls and sharp rises in the value of your investment.

Take 2008 for example, where the Latin American market fell 32.0% - a painful period for investors. But if you’d stayed invested for the two years following, you’d have seen a strong recovery.

Latin American, emerging and global markets - performance over 20 years

Past performance is not a guide to the future. Source: Lipper IM to 31/07/2019

Discover more about emerging markets

How to invest – Kate Marshall’s investment ideas

ASI Latin American Equity

We think ASI Latin American Equity is a good choice for investing in Latin America and could form a small part of a diversified portfolio. Its experienced managers have outperformed Latin American stock markets over the long term, which is why it features on the Wealth 50 list of our favourite funds.

The managers take a long-term approach, scouring the region for high-quality, well-run companies with strong balance sheets and sustainable business models.

They also aim to make sure they don’t overpay for companies, improving their chances of delivering positive returns. It means they only invest in a company's shares if they don't yet reflect their true growth potential.

The demographic trends in Latin America means there’s a growing middle class with more disposable income to spend on goods and services. And with over 55% of the fund invested in the consumer goods or financials sectors, it looks well positioned to take advantage.

The fund has done well against its benchmark since launch in 2011, although there are times when it underperformed too. Last year concerns about the effects of Donald Trump’s protectionist trade policies dragged the Mexican market lower. The fund’s invested 20% in Mexico, so it hurt performance. Remember, as with all Latin American funds, investing in emerging markets is higher risk.

Annual percentage growth
Jul 2014 -
Jul 2015
Jul 2015 -
Jul 2016
Jul 2016 -
Jul 2017
Jul 2017 -
Jul 2018
Jul 2018 -
Jul 2019
ASI Latin American Equity -27.2% 34.9% 22.2% -1.9% 21.1%
FTSE Emerging Latin America -25.3% 25.2% 18.6% 0.7% 17.9%

Past performance is not a guide to the future. Source: Lipper IM to 31/07/2019

More about this fund including charges

ASI Latin American Equity Key Investor Information

An alternative approach

If you prefer a more diversified approach to investing in higher-risk emerging markets, consider the HL Multi-Manager Asia & Emerging Markets fund.

Managers David Smith and Roger Clark invest with our favourite fund managers across the Asian and emerging markets, from Hong Kong to Brazil and South Korea to India. At the moment, 11.9% is invested in Latin America, though this could change over time depending on where the managers find the best opportunities. It mainly invests in large and medium-sized companies, but it has some exposure to higher-risk smaller companies with superior growth potential.

While a multi-manager fund costs more, we think it helps to keep things simple and provides some comfort that someone is looking after this part of your portfolio. The fund is run by our sister company, Hargreaves Lansdown Fund Managers Ltd.

More about this fund including charges

HL Multi-Manager Asia & Emerging Markets Key Investor Information

This article isn’t personal advice. If you’re not sure an investment is right for you please seek advice. All funds will go down as well as up in value so you could get back less than you invest.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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