Latin American equities rallied in the first quarter. Brazilian stocks led the move higher as investors grew increasingly optimistic about a change in Brazil's government. The 3.8% contraction in 2015 GDP growth failed to dampen investor sentiment. Mexican stocks also rose, as the peso recovered after hitting a record low against the U.S. dollar in early February. Also during the period, a rebound in key commodity prices, particularly copper, led Andean markets to post robust returns, and central banks in Peru and Colombia raised their respective benchmark interest rates to fight inflation.
The Latin America Fund returned 19.89% in the quarter compared with 19.23% for the MSCI Emerging Markets Latin America Index and 15.78% for the Lipper Latin American Funds Average. For the 12 months ended March 31, 2016, the fund returned −6.32% versus −8.87% for the MSCI Emerging Markets Latin America Index and −10.72% for the Lipper Latin American Funds Average. The fund's average annual total returns were −6.32%, −11.70%, and 1.33% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2016. The fund's expense ratio was 1.37% as of its fiscal year ended October 31, 2015.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The Latin America Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
Our investment process relies on our bottom-up assessment of an individual company's prospects rather than on an attempt to exploit broad shifts between markets and sectors based on political or economic developments. With that in mind, we increased our overweight position to Brazil despite the country's immediate challenges because of our long-term favorable view of its prospects. During the quarter, stock selection in Brazil and Peru and our off-benchmark position in Panama drove positive results. Our positioning in consumer discretionary and industrials and business services and our substantial overweight allocation to financials also helped. Poor stock selection in Mexico and an overweight to Argentina weighed on relative returns. Chile remains our most significant underweight given the country's lackluster outlook.
More challenges undoubtedly lie ahead for Latin America, especially Brazil. In particular, it seems unlikely that commodity prices will soon return to the levels that drove growth in the region in the previous decade, particularly as Chinese growth continues to slow. Nevertheless, we believe that the medium-term outlook for Latin America remains attractive. Growing middle classes and political reform are creating opportunities for competent management teams that are nimble enough to seize them. We continue to devote substantial effort to meeting with and assessing company managers, often through travel to the region. We are confident that such meetings and careful fundamental analysis will allow us to identify companies with high returns and sustainable above-market earnings growth rates.