BlackRock Latin American benefitted from the recovery in regional stock markets over the six months ended 30 June 2016 but underperformed its benchmark. The MSCI EM Latin America Index ended the period up by 25.7% in US dollar terms (38.6% in sterling terms). By comparison the NAV increased by 23.0% in US dollar terms (35.6% in sterling terms) and the share price increased by 19.3% in US dollar terms (31.6% in sterling terms). The Board has declared an interim dividend of 6.00 cents per share (2015: interim dividend of 15.00 cents per share).
The management fee will be reduced with effect from 1 January 2017 from 0.85% per annum to 0.80% per annum of the net asset value. In addition, the performance fee will be removed.
The primary detractor from performance was stock selection in Brazil. In addition, cash, which averaged 4.8%, weighed on returns. The Company also suffered from an overweight position in Mexico, but the impact was somewhat offset by stock selection. The largest individual detractor from performance was Brazilian pulp & paper stock, Fibria which suffered as a result of weakness in pulp prices so far this year. An underweight position in Vale, which we did not own before April, weighed on returns as the stock benefitted from an improvement in iron ore prices.
Positive contributions to performance stemmed primarily from an underweight position to Chile, which has been a relative underperformer so far this year. Performance was helped by overweight positions and stock selection in Peru. Stock selection in Mexico and our option overwriting strategy also added to performance. An underweight position in Mexican telecoms company, America Movil, was the largest individual contributor to relative performance as the stock suffered as a result of ongoing competitive pressures, especially in Mexico and Brazil, and post the Brexit vote given its exposure to Europe. Brazilian rail operator, Rumo, added to returns as the market reacted positively to its debt restructuring and capital increase.
BRLA : BlackRock Latin American cuts fees