BlackRock Latin American’s results for the year ended 31 December 2015 show a 30.9% fall in net assets on a total return basis in dollars (-27.0% in Sterling) and a -30.6% return to shareholders in dollars which translates as -26.6% in Sterling. These returns are pretty much in line with the fund’s benchmark which returned -30.8% (-26.8% in £).
The dividend was cut by 30% to 21 cents. The Board say, with respect to future dividends, it now seems prudent to recognise the changed environment. Rather than maintaining the historic level of distributions from capital, it is the Board’s intention to pay out future dividends which are in line with our reduced earnings. Whilst it is difficult so early in the year to predict the level of earnings with any accuracy, earnings for the current year indicate that the Board would be able to declare two equal dividends of 6.00 cents per share in respect of 2016. This would equate to a yield of approximately 2.7% on the share price at the time of writing. It should be noted that this indication should not be taken as a forecast and the Board reserves the right to alter the policy if market conditions change.
No tender offer is planned as the fund has beaten its benchmark.
The manager says the principal factors impacting the region’s stock markets were currency weakness, lower commodity prices, declining economic growth and the uncertainties in Brazil as a result of political and economic turmoil. Currency weakness in Latin America was widespread for the year. The Brazilian Real slid by 17% during the first quarter and ended the year down by almost 33%. In the commodities area, 2015 saw iron ore fall by over 36%, oil price by 30% and copper price by over 24%, all of which added additional pressure to a struggling region. Brazil’s equity market was one of the worst performers in the region, falling by 42% in US Dollar terms. By contrast, Mexico was one of the strongest relative performers for the year, falling by “just” 16.0%.
Performance during the year suffered as a result of an underweight position in Chile, which was one of the strongest relative performers in 2015. An overweight position and stock selection in Peru also weighed on returns. The largest individual detractors from performance included overweight positions to Brazilian education stock Kroton Educacional early in the year, Brazilian insurance stock BB Seguridade Participaçóes and Peruvian construction stock Graña y Montero. Kroton Educacional weighed on returns due to uncertainties in the Brazilian education sector, especially around changes to government-financed student loans as the budget was set for the year. BB
Seguridade Participaçóes suffered along with the rest of the Brazilian market, from the continued weakness in the Brazilian economy. In Peru, Graña y Montero underperformed in the year due to its failure to win many contracts under the current administration.
Offsetting some of the negative contributions were an overweight position in Mexico and underweight positions in Brazil and Colombia. Stock selection in Brazil and Mexico also contributed positively. At the stock level, the largest individual contributors to performance included an underweight position in Vale and overweight positions in Mexico’s Femsa and Brazil’s Fibria Celulose. Brazilian iron ore miner Vale suffered as a result of weak commodity prices, especially in iron ore. Mexican conglomerate Femsa benefited from the gradual recovery in Mexico’s domestic economy, especially via its subsidiary Oxxo. Brazilian pulp & paper stock Fibria contributed to performance due to positive sentiment towards the sector and from a weaker currency.
BRLA : BlackRock Latin matches benchmark, no tender planned