BlackRock Latin American Investment Trust (BRLA) has reported annual results for the year ended 31 December 2024, reflecting a particularly tough year for Latin American markets. The trust’s NAV total return fell by 35.7% in US dollar terms, underperforming its MSCI EM Latin America Index benchmark, which declined 26.4% over the period. The share price fell by 35.3% in US dollar terms and 34.1% in sterling terms.
This sharp reversal comes after a standout 2023 for the region, with the benchmark having returned +32.7%. However, a combination of macroeconomic and political headwinds – notably fiscal deterioration in Brazil and political uncertainty in Mexico – saw the region underperform significantly in 2024, particularly relative to developed markets.
Performance and portfolio positioning
The portfolio’s underperformance was largely attributed to overweight positions in Brazil, where policy missteps triggered currency weakness and a reversal in the interest rate cycle. Stocks such as Hapvida, Arezzo, Assai, and Cyrela were among the main detractors. Mexico also weighed on returns, driven by pre-election uncertainty and tariff threats linked to President Trump’s return to office.
There were some bright spots, including MAG Silver and Lundin Gold, which benefitted from strong commodity prices, and positive contributions from off-benchmark holdings such as Seatrium and Globant. The managers also increased exposure to Mexico following the post-election sell-off and rotated into better-capitalised companies in Brazil in anticipation of a challenging rate environment.
Gearing and income
The portfolio managers continued to use active gearing, ranging from 103.5% to 113.4% of NAV, with an average of 107.5% over the year.
The revenue return per share was 23.4 US cents (down from 30.5 US cents in 2023), largely due to lower dividends from portfolio companies. Nevertheless, the company declared total dividends of 24.7 US cents, representing a yield of 7.1% on the year-end share price. The board noted that sufficient revenue reserves remain to support approximately three further quarterly dividend payments.
Discount control and continuation mechanism
BRLA ended the year trading on an 11.6% discount to NAV. The average discount over the four-year measurement period for the trust’s discount control mechanism was 11.3%, just below the 12% threshold that could trigger a tender offer for up to 24.99% of shares in 2026, depending also on relative NAV performance.
Over the three-year period to 31 December 2024, the trust’s annualised NAV return was -1.9%, underperforming the benchmark’s +2.1% return by 400 basis points – also falling short of the outperformance hurdle.
Outlook
Chair Carolan Dobson acknowledged the challenges of 2024 but remains optimistic for 2025. At current caluations, she and the managers see scope for a re-rating, particularly if macro headwinds ease. The team is positioning for potential upside, especially in Brazil, where equities trade on historically low valuations and pay double-digit dividend yields. Mexico remains the portfolio’s largest overweight, supported by long-term nearshoring trends and scope for monetary easing.
The portfolio is underweight the rest of Latin America to concentrate capital in these high-conviction ideas. While political and global uncertainties persist, the managers believe the region offers compelling value and is well-placed to benefit from any shift in global investor sentiment.
