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JP Morgan Latin American Equity

JP Morgan Latin American Equity Fund is a fund that deploys bottom up and concentrated small-to-mid cap best ideas portfolio investment strategy.  The fund is managed by Luis Carrillo and Sophie Bosch de Hood based in New York.  JP Morgan has been investing in Latin America since 1992.

From 2000 to 2010, Latin America was one of the primary beneficiaries of the China-led commodities boom.  Because of the China’s investment, the region benefited from: 

  1. Forex reserves skyrocketed
  2. Sovereign and corporate balance sheets improved
  3. Currencies appreciated

The above sewed the seeds for the next phase of investment and growth for the region.  Apparently, consumption and infrastructure investment would seen to be the main factors to drive of the region’s economic growth which could favour small to mid companies in the region.

The chart below illustrates the performance of the large cap and small cap in Latin America from September 2009 to 2014-10-17:

Apparently, the small cap has outperformed the large cap consistently.  But for the last 2 year, the large cap has outperformed the small cap as shown below from September 2009 to 2014-10-17:

Table below illustrates the valuation of the fund against its benchmark - MSCI EM Latin America.

As of December 2014, the country and sector allocation is as shown:

In other words, in term of country allocation, the fund overweighed Brazil and Mexico.  On sector exposure, financials, industrials and consumer staples are the top 3.  Latin America is a resource rich region.  Obviously, the fund manager has taken a more prudent approach in underweighting the commodity cyclicals.  Instead, they are more focus on sector that could benefit from the long term trends like rising incomes, demographics and penetration of organised services.

This is not a fund for the people with weak heart as evident from its past volatility.  However, since the peak in September 2014,  the fund has fallen more than 25%.  The lost was once exceeded 30%!  In a strong dollar environment, we expect the fund to be volatile but there could be value and seen as a proxy to gain Brazilian and Mexico exposure.