Emerging markets stocks fell in the fourth quarter as plunging oil prices and a full-blown currency crisis in Russia sparked a bout of global risk aversion. Brazilian stocks fell nearly 15% as the drop in oil prices and a growing corruption probe weighed on Petrobras, the state-owned energy company. Brazil's central bank hiked its benchmark rate twice during the quarter in its ongoing struggle against inflation, a task made more difficult by the weakening real, which hit a nine-year low in December. Mexican stocks gave up roughly 12%. Mexico reported that its third-quarter GDP grew at a slower-than-expected pace, and in November the government cut its 2014 growth outlook for the second time this year. The country's central bank kept its key interest rate unchanged at a record low 3%. Colombian stocks fell nearly 23%, the most in the region. Colombia's third-quarter GDP growth was the fastest in Latin America, but in December the government cut its 2015 economic growth target to reflect lower prices for crude oil, the country's top export.
The Latin America Fund returned −13.34% in the quarter compared with −13.38% for the MSCI Emerging Markets Latin America Index and −12.87% for the Lipper Latin American Funds Average. For the 12 months ended December 31, 2014, the fund returned −13.08% versus −12.03% for the MSCI Emerging Markets Latin America Index and −13.61% for the Lipper Latin American Funds Average. The fund's average annual total returns were −13.08%, −6.50%, and 9.36% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 1.25% as of its fiscal year ended October 31, 2013.
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.
Brazil and Mexico are the fund's largest country allocations. The fund typically also owns companies in the small but rapidly growing Andean markets of Colombia, Chile, and Peru as well as in the so-called frontier markets of Panama and Argentina. We continue to favor companies in sectors that stand to benefit from rising domestic consumption and a growing middle class.
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. That said, 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 decline in commodity prices and the associated growth slowdown are creating a fiscal challenge for several nations, even as demands are growing for increased social spending. Many domestically focused companies in Latin America are feeling the pinch as governments raise taxes, both directly on businesses and on their customers. At the same time, many exporters still look expensive to us, although we do hold some low-cost mining firms and select industrials. The long-term promise of the region for investors remains intact, however, and we are confident our investment process is uncovering companies that should benefit when the economic cycle turns.