Latin American equities declined sharply in U.S. dollar terms in the first quarter, weighed down primarily by declines in local currencies relative to the dollar but also by weakness in oil and other commodity prices. Stocks in the largest market, Brazil, declined by over 14%, even as they rose nearly 3% in local currency terms. The performance gap in the important Mexico market was smaller, with stock prices rising roughly 1.3% in peso terms while declining nearly 2% when returns were translated into U.S. dollars. The smaller Argentina market was a standout performer, rising nearly 25% in U.S. dollar terms.
The Latin America Fund returned −6.75% in the quarter compared with −9.49% for the MSCI Emerging Markets Latin America Index and −8.95% for the Lipper Latin American Funds Average. For the 12 months ended March 31, 2015, the fund returned −18.26% versus −20.69% for the MSCI Emerging Markets Latin America Index and −20.15% for the Lipper Latin American Funds Average. The fund's average annual total returns were −18.26%, −8.13%, and 8.20% for the 1-, 5-, and 10-year periods, respectively, as of March 31, 2015. The fund's expense ratio was 1.31% as of its fiscal year ended October 31, 2014.
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.
We have a large position in the consumer discretionary sector, which should benefit from rising incomes, low unemployment, increasing levels of consumer spending, and a growing middle class. Over the quarter, we further raised our overweight stance by switching out of some of the portfolio's consumer staples holdings. Rising incomes and domestic consumption should also benefit the region's financial sector, which remains the largest absolute position in the portfolio.
Our investment process relies on our bottom-up assessment of an individual company's prospects, rather than an attempt to exploit broad shifts between markets and sectors based on political or economic developments. That noted, it is clear that the downturn in global commodity prices and the related rise in the U.S. dollar are having important effects throughout the region. In particular, the resulting growth slowdown is creating a fiscal challenge for several nations, even as demands grow for increased social spending. Many domestically focused companies in Latin America are feeling the pinch as governments raise taxes on both businesses and their customers. At the same time, many exporters still look expensive to us, although we hold some low-cost mining firms and selected industrials. The long-term promise of the region remains intact, however. When the economic cycle turns in Latin America-as we are confident it will, given the sound macroeconomic policies implemented by most countries in the past 15 years-we are optimistic that our investments will reward investors.