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Funds struggle to unlock Latin American potential

Volatility in Latin American markets poses a significant challenge to fund managers despite recent growth, according to a report from Standard & Poor&#39s Fund Services.

Although Latin American markets have rallied strongly in the last 18 months, funds underperformed their indices for the third year running in 1999.

The average fund underperformed the S&P/IFCG Latin American index by 4.8 percentage points.

Performance varied greatly from country to country. While smaller markets such as Argentina and Chile were avoided due to liquidity concerns, there was heavy investment in Brazil and Mexico.

One fund in the sector, Schroder Latin American, receives an S&P AAA rating in the report. Six funds are rated AA and a further seven have been awarded an A rating.

In a report on the Pacific region, the fund researcher concludes that the sector is continuing to make a rapid recovery after the Asian tiger was brought to its knees.

It says the MSCI Pacific index has increased by more than 50 per cent in the last two years. Key to this success has been exposure to technology, media and stocks, especially in Japan where investment has centre on a limited number of companies.

Of the 20 funds examined in the report, Fleming Flagship Pacific, JF Pacific securities and JF Pacific smaller companies are awarded an AAA rating. Seven funds are rated AA and the balance receive an A rating.

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