BlackRock Latin American Inv. Trust (LSE: BRLA)

Last close As at 01/11/2024

GBP3.09

−2.50 (−0.80%)

Market capitalisation

GBP92m

BlackRock Latin American Investment Trust seeks long-term capital growth and an attractive total return, primarily through investing in quoted Latin American securities. The trust was launched in 1990 and management was transferred to BlackRock on 31 March 2006 following a tender process. The trust has an indefinite life subject to a two-yearly continuation vote. The benchmark is the MSCI Emerging Markets Latin America Index.

Equity Proposition

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. 

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Equity Analyst

Melanie Jenner

Mel Jenner

Director, Investment Trusts

Key Management

  • Charlie Kilner

    Investment Trust Sales & IR

  • Melissa Gallagher

    Head of investment trusts

  • Sharon Faulkner

    Analyst - Investment Trusts

Share Price Performance

Price Performance
% 1M 3M 12M
Actual (4.5) (10.7) (12.9)
Relative (3.5) (9.2) (22.8)
52 week high/low 454.5p/310.0p

Overview

BlackRock Latin American Investment Trust’s (BRLA’s) managers Sam Vecht (lead) and Christoph Brinkmann (deputy) remain upbeat about the prospects for the trust and the region, even though FY23 was a year when the MSCI Emerging Markets Index surpassed the performance of most other global indices and BRLA’s results were even better. Latin American central banks have been proactive in raising interest rates to combat inflation and are now lowering rates, which should support both economic activity and asset prices. The region has distanced itself from rising geopolitical conflicts across the globe, a stance that the managers believe will attract both foreign direct investment and increasing interest from regional investors.

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