Aim: Growth by investing in Brazil, Mexico, Chile, Colombia, Peru and Argentina
Minimum investment: Lump sum £1,000
Investment split: 100% in Latin American equities
Isa link: Yes
Charges: Initial 5%, annual 1.5%
Commission: Initial 3%, renewal up to 0.5%
Martin Currie has introduced a Latin America fund to provide access to an area it says is overlooked by many investors. The portfolio contains 35 to 55 stocks that are unconstrained by country and sector weightings.
Discussing the positive aspects of the fund, The Morgans Group investment director Martin Dilke-Wing says: “The fund is good for IFAs and their clients in that it provides access to the market leading manager in this environment in terms of a demonstrable track record for a fund manager of a UK authorised Latin American Oeic.”
Dilke-Wing says that the fund’s peer group is small. But he adds that it would appear from a relatively short tenure of just over four years at Swip that manager Jeff Casson knows what he is doing. “The fund may be particularly suitable for clients who seek a more diversified exposure to Latin America than they can achieve by going for a single market fund in Brazil. Those clients may perhaps require a more focused approach than the exposure provided as a component of a wider emerging markets portfolio. He adds that the fund may have appeal particularly for investors who have an appetite for emerging market risk but maybe feel that they have missed the boat in China and India and are not attracted to Russia and Eastern Europe.
“The investment processes employed appear rigorous and the back up to Casson looks experienced, proficient and impressively multilingual,” says Dilke-Wing. He thinks the fund’s literature makes a very persuasive case for the potential attractions of investing in the region in terms of anticipated national economic growth rates across the region and the projected corporate earnings anticipated from the companies that will form the core of a highly focused portfolio.
Dilke-Wing then assesses the charges. “The charges look pretty standard, but perhaps at 1.5 per cent for the retail fund, they may even be cheaper than expected.” Dilke-Wing observes that IFA commission is not specified in the literature, but correctly anticipates that as there is a 5 per cent initial charge, the IFA will pick up 3 per cent out of this.
Turning to the potential drawbacks of the fund Dilke-Wing says: “The major problem with the product is that by its nature it is likely to be suitable for only a small proportion of a relatively aggressive investor’s portfolio.
“The projected advances in the economies of Latin America and their increasing economic importance will doubtless be significant, but many advisers will undoubtedly view this fund as by its nature essentially speculative. The perception of the countries represented by the fund in terms of political stability, social stability and historic systemic economic weakness may also act as a dissuading factor for a number of IFAs,” he says.
Dilke-Wing also feels that the strength of the individual manager as a selling point for the fund may also lead advisers to question how the investment will stack up if he is not there to lead the team for whatever reason.
Identifying the main competitors for the fund, Dilke-Wing says: “The products providing the main competition are likely to be the generic emerging markets funds. Particularly those with a strong Latin American presence, single country Brazil orientated funds, and the existing small universe of Latin American funds.” He adds that he would expect to see the fund achieve significant market share within its peer group.
Summing up, Dilke-Wing says: “As a general comment, I think that the fund provides a useful addition to the adviser’s armoury for filling a gap at the racier edge of a client’s portfolio. The processes look strong and the personnel is impressive.
“Given a reasonable macro outlook, I would expect the fund to see keen interest from investors and the more aggressive discretionary fund of fund managers.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good