Below are the four key points of its investment story.
1. The trust focuses on capital growth and an attractive total return from Latin American stocks.
BlackRock Latin American Investment Trust (BRLA) is managed by Sam Vecht, since December 2018 and deputy manager Christoph Brinkmann, since September 2022. They aim to generate capital growth and an attractive total return from a diversified portfolio of Latin American securities. The trust has an indefinite life, subject to a two-year continuation vote. Performance is measured against the MSCI Emerging Markets Latin America Index. When required, the managers can draw on the extensive resources of BlackRock’s Global Emerging Markets Team; BlackRock has been vocal about its commitment to investment in Latin America.
2. Latin America has above-average growth prospects and is attractively valued.
The International Monetary Fund’s growth projections for Latin America are superior to those for developed economies, helped by factors such as urbanisation, the shift to alternative energy, and an expanding middle class, which is driving demand for premium goods and services. However, Latin America has been out of favour with global investors and the region represents less than 10% of the MSCI Emerging Markets Index in 2024. As a result, Latin America is very attractively valued on both an absolute basis and compared to other markets.
3. Stocks are primarily selected on a bottom-up basis, and the managers are not afraid to invest ‘away from the crowd’.
While the benchmark is dominated by Brazil (c 60%) and Mexico (c 30%), Vecht and Brinkmann regularly invest outside of these markets including in countries that are not in the index such as Argentina and Panama. They consider that the best way to make money in Latin America is to be patient, invest for the long term and ‘away from the crowd’. The managers seek companies that have positive fundamentals in terms of good long-term earnings growth and cash flow generation, robust balance sheets and well-regarded management teams, and which are trading on reasonable valuations. An assessment of a company’s ESG credentials is an important element of every investment decision. The resulting portfolio is a high-conviction fund of 30–50 positions across the market cap spectrum, although investee companies are generally larger than $500m to ensure there is adequate liquidity if a position needs to be sold.
4. BRLA has a formalised NAV-based dividend policy and a discount control mechanism.
Since July 2018, quarterly dividends are paid, equivalent to 1.25% of BRLA’s calendar quarter-end US dollar NAV. This policy aims to help narrow the trust’s discount by making it more attractive to income-orientated investors. Distributions can be paid out of income or BRLA’s revenue and extensive capital reserves, ensuring that the managers are not forced to seek a higher portfolio yield, which may be at the expense of capital growth.
The board employs a discount control mechanism aiming to reduce BRLA’s discount volatility, favouring a conditional tender offer rather than share repurchases. Subject to the biennial continuation votes in 2024 and 2026 being passed, a 24.99% tender offer will be triggered if the trust outperforms its benchmark by less than 50bp per year over the four years ending on 31 December 2025, or if BRLA’s average share price discount to cum-income NAV exceeds 12% over this period.
