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Latin America - why now?

April 2021

Brunella Isper and Viktor Szabó, Investment Managers,
Aberdeen Latin American Income Fund Limited

Investment managers Brunella Isper and Viktor Szabó share their thoughts on why they believe an allocation to Latin America makes sense today.

Latin America poised for a rebound

While domestic political noise remains, corporate earnings are recovering on a steady foot, valuations are discounted in both historical and relative terms.

Covid-19 hit hard but also a catalyst for change

Companies were severely hit but many of our holdings managed to use this a trigger for change with efficiency and digitalization initiatives putting them in a stronger position as economies reopen

Improving sentiment

Latin America is inherently well positioned to benefit from a scenario of improved sentiment towards global trade due to the importance of commodity sector for the underlying economies

A widening investment universe

The index is quite narrow, however we continue to find interesting ideas to play within secular themes such as healthcare, e-commerce and digitalization trends which are not represented in the index. 40 companies lined-up for IPO in Brazil are likely to further broaden the universe.

Long term thesis intact

Young, growing populations with increasing wealth and underpenetrated sectors translates to an enormous opportunity to find quality companies to tap into long-term growth potential.

Stable income

Latin American bonds continue to offer a relatively high yield in an otherwise very low global yield environment.

Liquid local markets

Sovereigns have been increasingly relying on domestic markets for funding, developing deeper and more liquid bond markets.

Resilience

The region has developed the ability to withstand external macroeconomic shocks.

Latin America – why Aberdeen Latin American Income Fund?

Strong team

Our highly experienced and well-resourced EM team lends access to deep research and off benchmark investments.

Long term view

We focus on conservative management teams, industry-leading competitive positioning, sustainable, predictable returns and compelling long term growth drivers.

Strong ESG credentials

ESG integration and stewardship at the heart of the investment process allowing improved risk assessment, positive influence via engagement which results in a portfolio with lower carbon-intensity and superior ESG credentials vs benchmark.

Important information

Risk factors you should consider prior to investing:

  • The value of investments and the income from them can fall and investors may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
  • The Company may charge expenses to capital which may erode the capital value of the investment.
  • Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.
  • Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
  • The Company invests in emerging markets which tend to be more volatile than mature markets and the value of your investment could move sharply up or down.
  • Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.
  • With funds investing in bonds there is a risk that interest rate fluctuations could affect the capital value of investments. Where long term interest rates rise, the capital value of shares is likely to fall, and vice versa. In addition to the interest rate risk, bond investments are also exposed to credit risk reflecting the ability of the borrower (i.e. bond issuer) to meet its obligations (i.e. pay the interest on a bond and return the capital on the redemption date). The risk of this happening is usually higher with bonds classified as ‘sub-investment grade’. These may produce a higher level of income but at a higher risk than investments in ‘investment grade’ bonds. In turn, this may have an adverse impact on funds that invest in such bonds.
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends with match or exceed historic dividends and certain investors may be subject to further tax on dividends.

 

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Risk warning
Risk warning
The value of investments and the income from them can go down as well as up and you may get back less than the amount invested. Please refer to the relevant Key Information Document (KID) prior to making an investment decision. Please be aware of scams that can affect investors.