Fund investing: Why Mexico, Peru and Colombia trump Brazil

Fund investing: Why Mexico, Peru and Colombia trump Brazil

These reforms will boost industry and “could add a material amount to economic growth over the next few decades”.

Mr Smith also has taken bets on Columbia, because the opening up of the oil market a decade ago has transformed the economy, and Peru. The latter has benefited from a long spell of strong economic growth and low inflation, which has encouraged investment in the country. “It’s one of the most exciting markets to be investing in across all of Latin America,” he said.

But what about Brazil? Mr Smith plays down the impact of next year’s World Cup and the 2016 Rio Olympics. “The actual figures involved aren’t enough to move the dial on the economy,” he said. Instead, Mr Smith said his concerns lie with the effect of high inflation – at more than 6pc – and rising interest rates, which could slow the economy.

So despite the volatility, will investors look back in 20 years and regret not backing the region?

Yes, says Mr Smith, but you have to pick your countries carefully.

Should you invest and what are the alternatives?

Investing directly in a Latin America fund is only suitable for investors with very large portfolios, and who fully understand the dangers.

The region has a history of volatility. Argentina’s long turmoil (its economy collapsed after it defaulted on its debts in 2002) provides a perfect example. For most of us, a global fund, which will have some money in Latin America, provides enough exposure.

“I would certainly question why an investor would be looking to establish a holding in such a specialist region at this point in time,” said Philippa Gee, a wealth manager.

She also raised concerns about the manager’s lack of experience.

The fund is also costly, with an “ongoing charge” of more than 2pc a year (£200 on £10,000) for most investors.

Deutsche Bank has DBX trackers that follow the markets of some Latin countries, such as Chile and Mexico, at a cost of 0.65pc a year, but Ms Gee recommends the broader Vanguard Emerging Markets Stock Index, which costs 0.55pc.

For actively managed funds she recommends JPM Emerging Markets Small Cap if you can “tolerate higher charges” – of 1.9pc.

She also likes the Standard Life Global Emerging Markets Equity (1.7pc) for a “more mainstream emerging markets approach but from a relatively undiscovered fund manager”.

• Get Twitter alerts for all our investing stories: follow @telegraphinvest

• Investment tips every week by email – sign up here

Finance News – Business news from the UK and world


Uncategorized

Leave a Reply

Your email address will not be published.