GLOBAL - Latin America markets are proving attractive in the current climate because of their defensive qualities, according to ratings agency Standard & Poor's (S&P).
Emerging markets have outperformed the S&P 500 by more than 20% over the past three years. Managers have been focusing on their low valuations, particularly compared to the US. And many companies in emerging markets have proved resilient whilst worries about bloated profits plague industrialised markets.
Latin American investment is very much concentrated on Brazil and Mexico, whose combined weightings account for some 85% of the regional benchmark index. The two markets now represent 90% of the average Latin America regional fund, up on 83% from last year.
Strategies have focused on more liquid stocks. But there has been a considerable divergence in recent performance between Mexico and Brazil. According to S&P, Mexico has been strongly positive, while Brazil has fallen marginally.
Associate Director and lead Latin America analyst at S&P Hans Hamre said: “Overall managers remain positive on the outlook for emerging markets believing many current valuations are attractive relative to their developed counterparts. Short term, many accept the risk of a setback if the US market continues to test recent lows.
“In Latin America, the focus remains squarely on Mexico and Brazil. This reflects their greater market liquidity. Apart from Chile, typically half-weighted by managers, the smaller markets of Colombia, Peru and Venezuela are paid only limited attention. Most Latin America fund managers now have zero exposure to Argentina.”
By Madhu Kalia
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.