Latin American equity markets rose in U.S. dollar terms, outperforming both developed and broader emerging markets. A number of countries in the region are major exporters of natural resources, and continued strength in commodity prices was a favorable trend, with the oil price breaching $50 for the first time in several months. The prices of industrial metals strengthened, as did gold, which saw a particularly sharp move at the end of the quarter on safe-haven buying following the surprise Brexit vote. While this hit investor sentiment initially, Latin American markets generally shrugged off the Brexit concerns and ended the period on a strong note.
The Latin America Fund returned 9.54% in the quarter compared with 5.42% for the MSCI Emerging Markets Latin America Index and 8.72% for the Lipper Latin American Funds Average. For the 12 months ended June 30, 2016, the fund returned 0.51% versus −7.28% for the MSCI Emerging Markets Latin America Index and −4.29% for the Lipper Latin American Funds Average. The fund's average annual total returns were 0.51%, −9.47%, and 2.28% for the 1-, 5-, and 10-year periods, respectively, as of June 30, 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 raised the portfolio's exposure to Brazil over the quarter while deepening our underweight to Mexico, which appears less attractive from a top-down perspective while valuations are on the high side. At the sector level, we increased our overweight to financials, where we are finding good investment potential among real estate and banking stocks. We favor high-quality names in the consumer discretionary and consumer staples sectors and remain underweight to materials and energy because of our caution over the sustainability of the commodity rally.
We believe that the medium-term outlook for Latin America remains attractive as investors have significantly discounted any improvement, and the long-term promise of the region for investors remains intact. 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 through regular travel to the region, with trips this quarter including Peru, Mexico, and Argentina. 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.