Report Release Date: 20 Oct 2009
Analyst: Mark Laidlaw
Executive Summary
People: Will Landers has ran the fund since September 2002, making him one of the longer tenured managers in the Morningstar Latin America Equity category.
Parent: BlackRock is a high quality firm that does well by fund investors in most, but not all respects.
Process: The process is predominately bottom-up focused although macro factors are considered.
Performance: The manager has done a good job for investors, beating the Morningstar Category average since taking on the fund in September 2002.
Price: The fund's TER is slightly expensive than the category median.
Morningstar Opinion
We think BGF Latin American is a fine choice for investors seeking a fund dedicated to the region, though investors must beware of its inherent risks.
There are a few reasons why we have high regard for this fund, not least the manager behind it. Fund Manager Will Landers has been at the controls since September 2002, giving him one of the longer tenures in the category. Prior to this he spent seven years as a sell-side analyst covering a variety of sectors. Landers is a knowledgeable investor and this comes across not only when he talks about stocks but just as importantly he shows an impressive level of acuity in knowing what makes Latin American markets tick and how to take advantage of this in constructing the portfolio. Further, he is supported by an able investment team of three, two of whom are based in Princeton, New Jersey and one of whom is based in London. Given that there have been some changes in BlackRock’s emerging markets team this year, it is comforting to know that this unit has remained constant.
On the process front, there is nothing radical about what BGF Latin America does. Its strength comes from the manner in which it’s executed by Landers and his team. After using a liquidity screen to filter down an investible universe of over 2000 to a manageable level, the team looks to eliminate any countries with restrictive capital controls – Argentina is a good example of this and also looks to see if there are any sectors not suitable for investment. Stock selection is the focal point of the research effort and we are suitably impressed by the depth behind the valuation work and the research output.
Notwithstanding our high regard for the fund, investors should bear two caveats in mind. First, regional funds that invest in emerging markets like Latin American should be seen as niche players and are not suitable to play large roles in portfolios--they're simply too risky. Indeed, volatility goes hand in hand with investing here. For example, after a strong multi-year run, the fund lost over half of its value in 2008. Returns this year have bounced sharply – the fund is up a staggering 90% up to the end of September 2009. Also, although not a problem yet, asset size is something to keep an eye on here. The fund's assets were more than USD 5 Billion at September 2009. If that growth continues unchecked, it could cause a problem at some future date. We’ll monitor the situation, but we don't believe it's an issue at this time.
In all, we typically prefer global EM offerings to regional funds as they offer better diversification and more room for the manager to add value by tilting the fund toward those markets with the best prospects. However, for those seeking dedicated Latin America exposure, we believe this fund makes a strong case and deserves a Morningstar Qualitative Rating of Superior.
To learn more about the fund, please click here.
To read the full report, please click here.
