Investment trusts

About this investment trust

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

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.

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.

Kepler Rating: As at 1 January 2022.
Awards/Ratings have not been superseded to date.
Past performance is not a reliable indicator of future results and should not be the sole factor of consideration when selecting a product or strategy.

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

Fees & Charges

Fund manager commentary

31 December 2022

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.

For the month of December 2022, the Company’s NAV returned -5.2% with the share price moving 2.3%.¹ The Company’s benchmark, the MSCI EM Latin America Index, returned -5.0%¹ on a net basis (all performance figures are in sterling terms with dividends reinvested).

Latin American (LatAm) equities posted a positive performance over the month with Mexico and Brazil leading the rise.

Security selection in Mexico contributed the most to relative performance over the period while security selection in Brazil detracted most from relative returns. An off-benchmark holding of Argentinian IT and software development company, Globant, was the top contributor as the company has seen rapid revenue growth with industry leading margins through a strong set of accelerators that leverage AI and other technologies to reinvent key aspects of organizations. An overweight positon in Mexican airport operator, Grupo Aeroportuario del Pacifico, also benefitted the portfolio as the stock has outperformed following air traffic recovery. On the other hand, an overweight position in Rede D’Or, a Brazilian healthcare company, detracted most from relative performance as investors are concerned about rising inflation in Brazil and the impact it could have on margins for the hospital group. An off-benchmark holding in Brazilian electric services company, Neoenergia, also weighed on relative returns as the stock sold off along with other rate-sensitive sectors in Brazil.

Over the month we added to our position in America Movil, a Mexican telecommunications company, as the company has been experiencing strong profitability allowing for faster deleveraging of their balance sheet. We reduced our exposure to Falabella, a Chilean department store and sold our holding of Chilean chemicals company, Sociedad Quimica y Minera de Chile, to reduce exposure to political risk ahead of presidential Chilean presidential elections. The portfolio ended the period being overweight to Argentina and Mexico, whilst being underweight to Colombia. At the sector level, we are overweight financials and real estate, and underweight consumer staples and energy.

It has been a tough period for Latin America, with many countries hit hard by the COVID-19 crisis. However, we believe there are arguments to be made for better times ahead for the region as the world rebuilds after the pandemic and Latin America could be considered as a beneficiary of recovery in the global economy. As the region rebuilds, the Latin countries will have some important tailwinds. Perhaps the most significant are high commodity prices. Vast stimulus in the US and economic recovery across the world has pushed up demand for commodities after a period of tight supply. Global governments have ambitious, commodity-heavy infrastructure plans, particularly for green energy development. Latin America is one of the most abundant regions in the world for lithium, iron ore and copper with some of the longest-life reserves at a low cost in Brazil, Chile, and Peru. Despite this positive external backdrop, there are also broader risk factors that could weigh on regional economic growth. Across Latin America, a growing middle class is seeing domestic consumption pressured from rising inflation and increasing domestic interest rates. Latin American economies were boosted throughout the pandemic for the most part by expansionary monetary and fiscal policies. This has led to a rapid near-term rebound in demand given the reopening of economies at a time where rising energy costs, low inventories and supply chain issues have led to inflation exceeding expectations across the region. Central banks have aggressively reacted by hiking domestic interest rates to tame rising inflation. The impact of rising domestic rates will weigh on growth prospects, at the margin, but could be offset by continued loose fiscal policy. Over the next 12 months we will see presidential elections in Colombia and Brazil and one of the biggest debates is the amount of government spending to continue to support development. The outcome of these debates will have profound impact on growth going forward. Against this challenging backdrop, we see Latin American equities as already pricing in a great deal of risk factors as a number of stocks and country indices are already trading at discounted valuations in both absolute and relative terms.

¹ Source: Datastream as at 31 December 2022.

Source: Unless otherwise stated all data is sourced from BlackRock as at 31 December 2022.

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

Edward Kuczma, is co-manager of the BlackRock Latin American Investment Trust plc. Ed is a Portfolio Manager for BlackRock's Latin American Equity funds and a member of the Global Emerging Markets Equity team within BlackRock's Fundamental Active Equity business. He is a seasoned veteran of the emerging markets asset class with over 15 years of investment experience across all sectors and countries in Latin America. Ed has a BSc degree as a double major in Finance and Business Administration from Georgetown University and is a CFA charterholder.

Sam Vecht is co-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 and BlackRock Latin American Investment Trust plc. Sam joined BlackRock in 2000 in the Global Emerging Markets Team. He has a degree in international relations and history.

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 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.

Mahrukh Doctor was appointed as a Director on 17 November 2009. Dr Doctor is a senior lecturer in political economy at the University of Hull, specialising in Latin America. Previously she was Adjunct Associate Professor at the John Hopkins University SAIS Europe in Bologna and Research Fellow at St. Anthony's College and the Centre for Brazilian Studies at the University of Oxford and an Economist at the World Bank. She has been the Brazil expert on the Oxford Analytica International Conference Latin America panel since 2002.

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.

The Board's approach to ESG

As a Board we believe that good Environmental, Social and Governance (ESG) behaviour by the companies we invest in is critical to the long-term financial success of our Company. The Board recognises the importance to society of the need to invest in companies that are environmentally and socially responsible with clear governance structures. ESG issues can present both opportunities and threats to long-term investment performance. The securities within the Company’s investment remit are typically large producers of vital food, timber, minerals and oil supplies, and consequently face many ESG challenges and headwinds as they grapple with the impact of their operations on the environment and resources. The Board is also aware that there is significant room for improvement in terms of disclosure and adherence to global best practices for corporates throughout the Latin American region, which lags global peers when it comes to ESG best practice. These ESG issues faced by companies in the Latin American investment universe are a key focus of the Board, and it is committed to a diligent oversight of the activities of the Manager in these areas. Whilst the Company does not exclude investment in stocks purely on ESG criteria, ESG analytics are fully integrated into the investment process when weighing up the risk and reward benefits of investment decisions and the Board believes that communication and engagement with portfolio companies is important and can lead to better outcomes for stakeholders and the environment than merely excluding investment in certain areas.

Sustainable investing: BlackRock's approach

Sustainability is BlackRock’s standard for investing, based on the investment conviction that integrating sustainability can help investors build more resilient portfolios and achieve better long-term, risk-adjusted returns. BlackRock believes that climate change is a defining factor in companies’ long-term prospects and that it will have a significant and lasting impact on economic growth and prosperity. BlackRock believes that climate risk equates to investment risk and this will drive a profound reassessment of risk and asset values as investors seek to react to the impact of climate policy changes. This in turn is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade.

Environmental, Social and Governance: integration into BlackRock’s investment management process

Environmental, Social and Governance (ESG) investing is often conflated or used interchangeably with the term “sustainable investing.” BlackRock has identified sustainable investing as being the overall framework and ESG as a data toolkit for identifying and informing its solutions. BlackRock has defined ESG Integration as the practice of incorporating material ESG information and consideration of sustainability risks into investment decisions in order to enhance risk-adjusted returns. BlackRock recognises the relevance of material ESG information across all asset classes and styles of portfolio management.  ESG information and sustainability risks are included as a consideration in investment research, portfolio construction, portfolio review, and investment stewardship processes. The Investment Manager considers ESG insights and data, including sustainability risks, within the total set of information in its research process and makes a determination as to the materiality of such information in its investment process. ESG insights are not the sole consideration when making investment decisions and the extent to which ESG insights are considered during investment decision making will also be determined by the characteristics or objectives of the Company. The Investment Manager’s evaluation of ESG data may be subjective and could change over time in light of emerging sustainability risks or changing market conditions. This approach is consistent with the Investment Manager’s regulatory duty to manage the Company in accordance with its investment objectives and policy and in the best interests of the Company’s investors. The Investment Manager’s Risk and Quantitative Analysis group will review portfolios to ensure that sustainability risks are considered regularly alongside traditional financial risks, that investment decisions are taken in light of relevant sustainability risks and that decisions exposing portfolios to sustainability risks are deliberate, and the risks diversified and scaled according to the investment objectives of the Company.

BlackRock’s approach to ESG integration is to broaden the total amount of information the Investment Manager considers with the aim of improving investment analysis and understanding the likely impact of sustainability risks on the Company’s investments. The Investment Manager assesses a variety of economic and financial indicators, which may include ESG data and insights, to make investment decisions appropriate for the Company objectives. This can include relevant third-party insights or data, internal research or engagement commentary and input from BlackRock Investment Stewardship.

Sustainability risks are identified at various steps of the investment process, where relevant, from research, allocation, selection, portfolio construction decisions, or management engagement, and are considered relative to the Company’s risk and return objectives. Assessment of these risks is done relative to their materiality (i.e. likeliness of impacting returns of the investment) and in tandem with other risk assessments (e.g. liquidity, valuation, etc.).

ESG integration does not change the Company’s investment objective or constrain the Investment Manager’s investable universe, and does not mean that an ESG investment strategy or exclusionary screens has been or will be adopted by the Company. Similarly, ESG integration does not determine the extent to which the Company may be impacted by sustainability risks.

Investment Stewardship

BlackRock undertakes investment stewardship engagements and proxy voting with the goal of protecting and enhancing the long-term value of clients’ investments for relevant asset classes. In our experience, sustainable financial performance and value creation are enhanced by sound governance practices, including risk management oversight, board accountability, and compliance with regulations. We focus on board composition, effectiveness and accountability as a top priority. In our experience, high standards of corporate governance are the foundations of board leadership and oversight. We engage to better understand how boards assess their effectiveness and performance, as well as their position on director responsibilities and commitments, turnover and succession planning, crisis management and diversity. BlackRock takes a long-term perspective in its investment stewardship work informed by two key characteristics of our business: the majority of our investors are saving for long-term goals, so we presume they are long-term shareholders; and BlackRock offers strategies with varying investment horizons, which means BlackRock has long-term relationships with its investee companies. For further detail regarding BlackRock’s Investment Stewardship approach please refer to the website here.

Engagement with portfolio companies

The Board receive regular updates from the Investment Manager in respect of activity undertaken for the year under review. Over the year to 31 December 2020, 40 total company engagements were held with the management teams of 17 portfolio companies representing 63% of the portfolio by value at 31 December 2020. To put this into context, there were 43 companies in the BlackRock Latin American Investment Trust plc’s portfolio at 31 December 2020 (31 December 2019: 49). In total 701 proposals were voted on at 74 shareholder meetings.