Investment trusts

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.

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Awards/Ratings have not been superseded to date.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

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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The Board's approach to ESG

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.

Environmental, social and governance (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 on ESG criteria, ESG analytics are 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 shareholders and the environment than merely excluding investment in certain areas.

More information on BlackRock’s global approach to ESG integration, as well as activity specific to the BlackRock Latin American Investment Trust plc portfolio, is set out below. 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. ESG integration does not change the Company’s investment objective. More information on sustainability risks may be found in the AIFMD Fund Disclosures document of the Company available on the Company’s website at https://www.blackrock.com/uk/individual/literature/policies/itc-disclosure-blackrock-latin-america-trust-plc.pdf.

BlackRock Latin American Investment Trust plc - engagement with portfolio companies in 2021

Given the Board’s belief in the importance of engagement and communication with portfolio companies, it receives regular reports from the Manager in respect of activity undertaken for the year under review. The Board reviews these closely and asks for further updates and progress reports from the Portfolio Managers in respect of evolving ESG issues and the action being taken where appropriate. The Board notes that over the year to 31 December 2021, 61 total company engagements were held with the management teams of 23 portfolio companies representing 76% of the portfolio by value at 31 December 2021. Additional information is set out in the tables that follow.

¹ Source: BlackRock and Institutional Shareholder Services as at 31 December 2021.
² Source: BlackRock. Company valuation as included in the portfolio at 31 December 2021 as a percentage of the total portfolio value.

*Engagements include multiple company meetings during the year with the same company. Most engagement conversations cover multiple topics and are based on BlackRock vote guidelines and BlackRock’s engagement priorities can be found at: https://www.blackrock.com/corporate/about-us/investment-stewardship#engagement-priorities. The numbers in the tables above reflect the number of meetings at which a particular topic is discussed.

¹ Sources: ISS Proxy Exchange and BlackRock Investment Stewardship.

BlackRock’s approach to ESG integration

BlackRock believes that sustainability risk – and climate risk in particular - now 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, in BlackRock's view, is likely to drive a significant reallocation of capital away from traditional carbon intensive industries over the next decade. BlackRock believes that carbon-intensive companies will play an integral role in unlocking the full potential of the energy transition, and to do this, they must be prepared to adapt, innovate and pivot their strategies towards to a low carbon economy.

As part of BlackRock’s structured investment process, ESG risks and opportunities (including sustainability/climate risk) are considered within the portfolio management team’s fundamental analysis of companies and industries and the Company’s portfolio managers work closely with BlackRock Investment Stewardship Team to assess the governance quality of companies and investigate any potential issues, risks or opportunities.

As part of their approach to ESG integration, the portfolio managers use ESG information when conducting research and due diligence on new investments and again when monitoring investments in the portfolio. In particular, portfolio managers at BlackRock now have access to 1,200 key ESG performance indicators in Aladdin (BlackRock's proprietary trading system) from third-party data providers. BlackRock’s internal sustainability research framework scoring is also available alongside third-party ESG scores in core portfolio management tools. BlackRock’s access to company management allows it to engage on issues that are identified through questioning management teams and conducting site visits. In conjunction with the portfolio management team, BlackRock Investment Stewardship Team meets with boards of companies frequently to evaluate how they are strategically managing their longer-term issues, including those surrounding ESG and the potential impact these may have on company financials. BlackRock's and the portfolio management team’s understanding of ESG issues is further supported by BlackRock’s Sustainable Investment Team (BSI). BSI look to advance ESG research and integration, active engagement and the development of sustainable investment solutions across the firm. 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 or impact focused investment strategy or any exclusionary screens have 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

As a fiduciary to its clients, BlackRock has built its business to protect and grow the value of clients’ assets. As part of this fiduciary duty to its clients, BlackRock is committed to promoting sound corporate governance through engagement with investee companies, development of proxy voting policies that support best governance practices and also through wider engagement on public policy issues.

Global Principles

BlackRock’s approach to corporate governance and stewardship is explained in its Global Principles. These high-level Principles are the framework for BlackRock’s more detailed, market-specific voting guidelines, all of which are published on the BlackRock website. The Principles describe BlackRock’s philosophy on stewardship (including how it monitors and engages with companies), its policy on voting, its integrated approach to stewardship matters and how it deals with conflicts of interest. These apply across relevant asset classes and products as permitted by investment strategies. BlackRock reviews its Global Principles annually and updates them as necessary to reflect in market standards, evolving governance practice and insights gained from engagement over the prior year. BlackRock’s Global Principles are available on its website at https://www.blackrock.com/corporate/literature/fact-sheet/blk-responsible-investment-engprinciples-global.pdf.

Market-specific proxy voting guidelines

BlackRock’s voting guidelines are intended to help clients and companies understand its thinking on key governance matters. They are the benchmark against which it assesses a company’s approach to corporate governance and the items on the agenda to be voted on at the shareholder meeting. BlackRock applies its guidelines pragmatically, taking into account a company’s unique circumstances where relevant. BlackRock informs voting decisions through research and engage as necessary. BlackRock reviews its voting guidelines annually and updates them as necessary to reflect changes in market standards, evolving governance practice and insights gained from engagement over the prior year.BlackRock’s market-specific voting guidelines are available on its website at https://www.blackrock.com/corporate/about-us/investment-stewardship#principles-and-guidelines.

In 2021, BlackRock explicitly asked that all companies disclose a business plan aligned with the goal of limiting global warming to well below 2ºC, consistent with achieving net zero global greenhouse gas (GHG) emissions by 2050. BlackRock viewed these disclosures as essential to helping investors assess a company’s ability to transition its business to a low carbon world and to capture value-creation opportunities created by the climate transition. BlackRock also asked that companies align their disclosures to the Task Force on Climate-related Financial Disclosures (TCFD) framework and the SASB standards. For 2022, BlackRock is evolving its perspective on sustainability reporting to recognise that companies may use standards other than that of the SASB and reiterates its ask for metrics that are industry - or company - specific. BlackRock is also encouraging companies to demonstrate that their plans are resilient under likely decarbonisation pathways, and the global aspiration to limit warming to 1.5°C. BlackRock is also asking companies to disclose how considerations related to having a reliable energy supply and just transition affect their plans. More information in respect of BlackRock’s investment stewardship approach to sustainable investing can be found at https://www.blackrock.com/corporate/literature/publication/blk-commentary-climate-risk-and-energy-transition.pdf.

BlackRock has been a member of Climate Action 100+ since 2020 and has aligned its engagement and stewardship priorities to UN Sustainable Development Goals (including Gender Equality and Affordable and Clean Energy). A map of how BlackRock Investment Stewardship's engagement priorities align to the UN Sustainable Development Goals (SDGs) can be found at https://www.blackrock.com/corporate/literature/publication/blk-engagement-priorities-aligned-to-sdgs.pdf.

BlackRock is committed to transparency in terms of disclosure on its engagement with companies and voting rationales and is committed to voting against management to the extent that they have not demonstrated sufficient progress on ESG issues. This year, BlackRock voted against or withheld votes from 6,560 directors globally at 3,400 different companies driven by concerns regarding director independence, executive compensation, insufficient progress on board diversity, and overcommitted directors, reflecting our intensified focus on sustainability risks. In the 2020-21 proxy year, BlackRock voted against 255 directors and against 319 companies for climate-related concerns that could negatively affect long-term shareholder value. More detail in respect of BlackRock's engagement and voting history can be found at https://www.blackrock.com/corporate/literature/publication/2022-investment-stewardship-voting-spotlight.pdf.

BlackRock also publishes voting bulletins explaining its vote decision, and the engagement and analysis underpinning it, on certain high-profile proposals at company shareholder meetings. Vote bulletins for 2021 can be found at https://www.blackrock.com/corporate/about-us/investment-stewardship#vote-bulletins.

BlackRock's reporting and disclosures

In terms of its own reporting, BlackRock believes that the SASB provides a clear set of standards for reporting sustainability information across a wide range of issues, from labour practices to data privacy to business ethics. For evaluating and reporting climate-related risks, as well as the related governance issues that are essential to managing them, the TCFD provides a valuable framework. BlackRock recognises that reporting to these standards requires significant time, analysis, and effort. BlackRock's 2021 TCFD report can be found at https://www.blackrock.com/corporate/literature/continuous-disclosure-and-important-information/tcfd-report-2022-blkinc.pdf.

Fund manager commentary

31 May 2023

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 was up 6.5% in May, outperforming the benchmark, MSCI EM Latin America Index which returned 0.5% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.¹

In Latin America, Argentina and Brazil outperformed in May (USD +3.8%m/m and +0.6% m/m respectively), while the rest of the region was down, Colombia (USD -6.7%m/m), Mexico (USD -2.6%m/m and Chile (USD -3.3%m/m).

From a country perspective, Brazil has been the key contributor to performance. We have been overweight domestic, interest-rate sensitive stocks in Brazil since the start of the year and this position has finally paid off in May. There has been a material shift in sentiment in the Brazilian market after the fiscal outlook improved and inflation undershot expectations for several months. This has led investors to move forward their expectations for the start of the easing cycle in Brazil, which shifted the yield curve down and supported asset prices. Separately, our underweight and stock positioning in Mexico and Peru also helped relative returns. There were no detractors from country positioning, we saw positive relative returns in all country positions.

From a single name perspective, Hapvida, a Brazilian health care service provider, has been the best performer. The stock sold off sharply in March as the market focused on 4Q23 results, but since then the balance sheet has been recapitalized and the company decided to raise prices more significantly, which should improve margins going forward. We had added to this position during the sell-off in March. Low-income homebuilder MRV and investment management platform XP also performed very well as their earnings outlook is sensitive to lower interest rates (as lower rates make housing more affordable in the case of MRV and lead to flows from fixed income to equities in the case of XP). Our underweight position in Vale, a Brazilian iron ore miner, continued to help relative returns, as iron ore prices declined on the back of disappointing commodity demand in China. Globant, a software company based in Argentina, performed strongly after reporting stronger revenue growth than most global peers.

On the other side, our overweight in Brazilian supermarket chain, Assai, has continued to underperform as food retail sales were below expectations in April/May. Tenaris, the off-benchmark steel pipe manufacturer in Argentina, underperformed as it’s been trading down together with the weakness in the oil price. Banorte, a leading Mexican bank, detracted as the market is anticipating an end to the rate hiking cycle in Mexico. Chilean brewer CCU, weighed on returns post weak Q1 earnings results reported in May.

Considering the very strong performance of domestic Brazilian assets during May, we have started to trim our positions in Brazil, as a result our exposure to Brazil has been reduced. We added to our position in Globant, taking advantage of the underperformance as an opportunity to add to our position. We reduced our position in Braskem after the stock spiked on the back of a buyout offer and we trimmed our position in Cemex, a cement supplier in Mexico, to reduce our exposure to US cyclicality. We also initiated positions in two names in May, Mag Silver, a silver miner operating in Mexico, which is ramping up its key asset this year and recently reached commercial production. In addition, we initiated a position in Ecopetrol, an oil and gas company in Colombia, where the government has committed to pay outstanding receivables that the government owes the company.

Our largest overweight is in Argentina as we hold two off-benchmark names. While we have reduced the weight in Brazil, by taking profit in several names, it remains the second largest overweight. We are most underweight Mexico and Peru.

Outlook

In Brazil, domestic activity has slowed down materially as monetary policy is very restrictive. Inflation has already declined significantly to 3.94% in May, which means that the policy rate can likely be lowered from the current high level of 13.75% over the next six months. The government’s fiscal framework is more orthodox versus market expectations, which helps to reduce uncertainty regarding the fiscal outlook and is key for the central bank to start reducing rates. A reduction in interest rates is the most important support for both the economy and the equity market.

Mexico remains defensive as both fiscal and the current account are in order however, concerns remain on how the market will behave if the US goes into a recession. Banxico has raised their interest rates to 11% and with inflation receding to 6%, they can stay on hold there before reducing rates later in the year.

High interest rates have attracted financial flows in the form of carry trades and the Mexican peso has appreciated strongly year-to-date. Our lower allocation in Mexico is largely a result of locking in strong performance.

In Peru, political uncertainty and social unrest will continue to weigh on market performance. The lack of support for the government and increased fragmentation in congress represent a difficult environment to form an effective government.

The recent constitutional election in Chile has resulted in a very strong outcome for the conservative, right-wing parties, in a sign that the population has lost confidence in the policies of leftist President Boric. We believe this is positive from a market perspective, as it should result in stronger checks and balances on the government and removes the risk of a radical new constitution. However, we have not yet increased our exposure because economic activity continues to be weak due to the hangover from past years’ pension withdrawals.

There have been some negative developments in Colombia in recent months. President Pero removed the majority of his cabinet including the orthodox Finance Minister, who had been the last point of trust and stability from a market perspective. We believe this is a sign that Petro will act in a more radical way going forward.

We continue to have a negative view on the Argentinian economy as the government’s policies of increasing the monetary base while being unwilling to devalue the currency creates large imbalances and inflation. Our off-benchmark positions in Argentina are not exposed to the domestic economy as they generate revenues from exports globally.

Source: ¹ Datastream as at 31 May 2023
Source: Unless otherwise stated all data is sourced from BlackRock as at 31 May 2023.

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.