New York Times: Latin American investors recommend investing in ...

David_Snowball

uhhh, Latin America. The article, which quotes a wide range of L.A. fund managers (and me) is "In Brazil, A Reminder of Emerging Market Risks."

It's a generally sensible, well-written piece (which quotes me) with a range of voices and a good perspective on risk. Fidelity manager Adam Kutas strikes me as slightly delusional, in arguing that that you should have 5 -10% of "a typical diversified portfolio" in Latin America (global market cap is around $55Tr, Latin America is around $3 Tr. with half of that in Brazil) and that Latino-Americans probably have special insights that make them better L.A. investors. By which logic, Iowans ought to be trashin' the rest of you on ag futures and Amercans ought to be making brilliantly insightful moves in the U.S. market.

My input: target your investments only where you have an advantage (in knowledge, insight, discipline or time) over other investors. The prospect that few of us can seriously make that claim with regard to single nations or small regions.

For what interest it holds,

David

scott

I took the downturn in Brazil to start a long-term holding in AmBev (effectively LatAm Budweiser - also distributes Pepsi in LatAM and beer - Labatt - in Canada) Globally recognizable, broad appeal and terrific dividend policy.

I'd be happy to look for other opportunities in Brazil if things change there (credit card/payment processing co Cielo is a company I'd look at adding down the road if things changed in Brazil, for example.) There are some interesting stories in Brazilian stocks. I think the downturn in EM has offered some compelling opportunities beyond just Brazil as well.

Additionally, as for Brazil, look at state owned oil co Petrobras - lower than the 2009 low and down 80% in 5 years. It used to be a big deal. It is, however, still a staple in most LatAM ETFs/mutual funds. As is Vale.

Good article and I agree with the comment that some of the Fidelity manager's comments are rather odd. I don't think people should have significant positions in specific region funds, but I continue to be a believer that people should have direct (not just via US multinational) exposure to emerging markets.

Investor

David,

You dropped a few key words of Mr. Kutas.

I've included his quotes here. Please note the highlight:

Thus Adam J. Kutas, manager of the Fidelity Latin America fund, suggests a fund like his should account for no more than 5 percent to 10 percent of a typical diversified portfolio. “These are markets that are earlier in their growth phase than the U.S. or Europe,” Mr. Kutas said. “They can add a lot of enhanced return, but you have to be comfortable with the risk.”

In other words, even if you might like the region, he is pro limiting the exposure to a small portion. 5 to 10% is a number often thrown out in these context.

Also regarding the insight:

Mr. Kutas took a different view, noting that a growing number of people in the United States do have firsthand Latin America knowledge. Many have roots and family in the region, travel there regularly and speak Spanish or Portuguese.

“If you do have a personal connection, that can help you understand the risk you’re taking on,” he said. “And if you want to invest in the region you come from or participate in the opportunities you see there, a Latin America fund is one way to do it.”

He is talking about people in US (not those currently living in Lat. Am.) having more insight regarding the risks of investing in Lat. Amer. and might feel more comfortable doing so. It is debatable if that is indeed so but I think the way I read it is different from your take.

BTW, I am also in agreement in what you stated in that article. I think more diversified exposure to Emerging markets is a better way.