BlackRock Latin American Investment Trust plc

About this investment trust

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The Company aims to secure long-term capital growth and an attractive total return primarily through investing in quoted securities in Latin America.

Why choose it?

Latin American countries hold a wealth of opportunities for long-term investors keen to participate in the region's growth and diversity. Our experienced team draws on its extensive network in the region to uncover the most compelling opportunities across a variety of countries and sectors.

Diversification and asset allocation may not fully protect you from market risk.

Suited to…

Investors with a long-term horizon who want to include Latin American shares in their portfolio and are able to tolerate periods of market volatility in pursuit of capital growth. This means shares prices may rise and fall more frequently.

What are the risks?

• Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
• Overseas investment will be affected by movements in currency exchange rates.
• Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore the value of these investments may be unpredictable and subject to greater variation.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Useful information

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Fees & Charges

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ESG Integration

The fund noted above does not commit to sustainable criteria nor does it have a sustainable investment objective.

BlackRock considers many investment risks in our processes. In order to seek the best risk-adjusted returns for our clients, we manage material risks and opportunities that could impact portfolios, including financially material Environmental, Social and/or Governance (ESG) data or information, where available. See our Firm Wide ESG Integration Statement for more information on this approach and fund documentation for how these material risks are considered within this product, where applicable.

Fund manager commentary

31 October 2024

Comments from the Portfolio Managers

Please note that the commentary below includes historic information in respect of the performance of portfolio investments, index performance data and the Company’s NAV and share performance.

The figures shown relate to past performance. Past Performance is not a reliable indicator of current or future results.

The Company’s NAV fell -2.0% in October, underperforming the benchmark, MSCI Emerging Markets Latin America Index, which returned -1.0% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.¹

Emerging markets fell by 4.4% in October, caught in the crossfire of a global equity sell-off. Emerging markets underperformed developed markets with the MSCI Developed Markets Index falling by 2.0%. Latin America finished the month down (-5.1%), driven by negative returns in Brazil (-5.5%) and Mexico (-5.0%). Brazil continues to struggle to shake off concerns on fiscal slippage especially against a background of higher growth and elevated inflation. Mexico suffered as a result of higher US yields meaning a weaker MXN while predictions of a Trump win weighed on the market too.

At the portfolio level, security selection in Mexico and off-benchmark exposure to engineering solutions provider Seatrium, were the key positive contributors to performance. On the other hand, stock picking in Brazil and having no exposure to Peru hurt performance over the month.

From a security lens, the Mexican silver miner, MAG Silver, was the best performing stock over the month, helped by stronger silver prices and strong operational performance at their main mine. Another strong contributor was Mexican airport operator Grupo Aeroportuario del Pacífico (GAPB). While their third-quarter results were a miss, the company is still on track to beat their full year 2024 guidance and we continue to like the name. Another positive contributor was Seatrium, the Singapore based engineering solutions provider, which is building offshore oil equipment for Brazilian state-owned oil producer Petrobras. The company did well on the back of strong third-quarter results. Banorte, the Mexican bank, also helped performance in October with third-quarter results showing net income up 7% year over year.

On the flipside, an underweight position to Brazilian digital banking platform provider, NU Holdings, was the largest detractor. Being listed in the United States, the stock has shown a stronger correlation to U.S. equity markets, despite its operations being largely in Brazil and Mexico. Another detractor was Brazilian healthcare operator Hapvida. The health care sector at large has seen an increased judicialization. As a result, investors have become concerned that Hapvida will need to increase provisions for court cases. We believe the market is overreacting and continue to own the stock. Becle, a Mexican producer and supplier of alcoholic beverages, was another detractor. The stock has underperformed on volume concerns, but we believe the stock will see a significant increase in margins on the back of lower agave prices.

We made some changes to the portfolio in October. We took profits and trimmed our exposure to MAG Silver and also took some profits on Banorte. We exited gold miner Franco-Nevada based on the view that the restart of the Cobre Panama copper mine will take some time. We took advantage of recent weakness to add to Brazilian logistics company, Rumo, as operations are doing well. We re-initiated a position in Mexican cement producer, Cemex, as it has de-levered and is trading on a cheap multiple.

Mexico is the largest portfolio overweight as at the end of October. Brazil is our second largest overweight. On the other hand, the largest underweight was Peru. The second largest portfolio underweight was Chile.

Outlook

We remain optimistic about the outlook for Latin America. The start of the Federal Reserve's easing cycle should be supportive for Latin America. Whilst the September index performance has been mixed, we maintain conviction that fundamentals remain robust and that stronger growth, now coupled with greater policy flexibility, should result in reduced risk premia. In addition, the whole region is benefitting from being relatively isolated from global geopolitical conflicts. We believe that this will lead to both an increase in foreign direct investment and an increase in allocation from investors across the region.

Source: Unless otherwise stated all data is sourced from BlackRock as at 30 September 2024.

In Brazil, whilst contra to our initial thesis, the central bank embarked on a tightening phase to get ahead of persistent inflation, we are still excited about the bottom-up opportunities within the market as earnings have been strong across sectors. Real rates remain high and if policy makers are able to stem investor concerns surrounding recent fiscal slippage, we would expect to see a reversal in monetary policy that would drive the top-down support we have patiently been waiting for. We have trimmed risk at the margin, particularly in the more rate sensitive exposures, and would look to add as rates peak once again.

We remain positive on the outlook for the Mexican economy as it is a key beneficiary of the friend-shoring of global supply chains. Mexico remains defensive as both fiscal and the current accounts are in order. The outcome of the presidential elections in early June has created a lot of volatility for Mexican financial assets, with the Peso depreciating significantly. Investors are concerned that the landslide win of president-elect Sheinbaum and the Morena party will result in reduced checks and balances for the government. The passing of the controversial judicial reform in early September is a good example of this. We are certainly concerned about the implications of the reform for judicial independence. We have visited Mexico in the week after the election to meet with investors, business owners and political advisors. Our conclusion from that trip is that we believe the government will remain relatively pragmatic and fiscally prudent, as it has been during AMLO’s (Andrés Manuel López Obrador) term. We have therefore used the market correction to add to certain positions.

¹Source: BlackRock as at 31 October 2024

Any opinions or forecasts represent an assessment of the market environment at a specific time and are not intended to be a forecast of future events or a guarantee of future results.

This information should not be relied upon by the reader as research, investment advice or a recommendation.

Risk: Reference to the names of each company mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies.

Portfolio manager biographies

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

Sam Vecht is lead manager of the BlackRock Latin American Investment Trust plc. He is Head of the Emerging Europe, Frontiers and LatAm team within the Fundamental Active Equity division of BlackRock's Active Equities Group and is responsible for managing long-only and long/short portfolios in both Emerging and Frontier markets. He is also co-manager of the BlackRock Frontiers Investment Trust plc. Sam joined BlackRock in 2000 in the Global Emerging Markets Team. He has a degree in International Relations and History.

Christoph Brinkmann is deputy manager of the BlackRock Latin American Investment Trust plc. He is Vice President in the Global Emerging Markets Equities Team who has covered multiple sectors and countries across the Latin American region. He joined BlackRock in 2015 after graduating from the University of Cologne with a Masters in Finance and a CEMS Masters in International Management.

Board of directors

Carolan Dobson (Chairman) was appointed as a Director on 1 January 2016 and as Chairman on 2 March 2017. She is the former Head of UK Equities at Abbey Asset Managers and former Head of Investment Trusts at Murray Johnstone and therefore brings a wealth of industry experience to the Board. She is currently Non-Executive Chairman of Brunner Investment Trust plc and Baillie Gifford UK Growth Fund plc.

Craig Cleland was appointed as a Director on 1 January 2019 and Chairman of the Audit Committee from 31 March 2019. He is Head of Corporate Development/Investment Trusts at CQS (UK) LLP, a multi-asset asset management firm in London with a focus on credit markets, where his responsibilities include advising and developing the closed-end fund business. He is also a Director of Invesco Perpetual Select Trust plc and the CC Japan Income & Growth Trust plc and was formerly a Director of Martin Currie Asia Unconstrained Trust plc. He was previously at JPMorgan Asset Management (UK) Limited, latterly as Managing Director, and led their technical groups in the investment trust business. Prior to that, he was a Director and Senior Company Secretary at Fleming Investment Trust Management, transferring to JPMorgan Asset Management after Chase Manhattan Bank acquired Robert Fleming Holdings Limited.

Laurie Meister was appointed as a Director on 1 February 2020. Ms Meister has 32 years of financial markets experience, both in New York and in London, with 28 years dedicated to having led and developed Latin American equity and capital markets businesses and other emerging markets. Her most recent position was as the Director of Latin American equity sales for European institutional clients for Deutsche Bank from 2008 to 2018. Prior to this she worked for J.P. Morgan Chase as a Director with responsibility for rebuilding the Cemea (Central and Eastern Europe, Middle East and Africa) equity business and then became the Senior European Equity Director for their Latin American equity business. Her initial experiences in the Latin American equity arena included the European start up in the early 1990s of the Merrill Lynch Latin American research sales operation. She then moved as a Managing Director to Robert Flemings in 1995 where she co-led the start-up of their Latin American trading sales and research operations across the region. Ms Meister has a B.A. from the University of Pennsylvania and an M.B.A. in Finance from the New York University Stern School.

Nigel Webber was appointed as a Director on 1 April 2017. Mr Webber’s broad investment experience has seen him lead the design of investment solutions for affluent and high-net-worth individuals across global markets and multiple asset classes. Most recently, he was Global Chief Investment Officer for HSBC Private Banking where he held global responsibility for all investment activity for Group Private Banking. During his time at HSBC, Mr Webber was also Chairman of the Global Investment Committee for Group Private Bank and Chairman for HSBC Alternative Investments Limited. Prior to this, he held a number of blue-chip executive positions around the world for investment and asset management businesses. He is also a qualified accountant.