Transcript
Speaker: See you next time.
Speaker: Welcome to Uncovering Trust, a podcast by Edison Group. I am Neil Shah, and today we are turning our attention to a region that has firmly re-entered the investment spotlight over the past year, Latin America.
Speaker: To discuss this, I'm joined by Milos Paps, Director Investment Company Content at Edison. Milos, thank you for joining me again. Thank you, Neil. Milos, before we dive into recent developments, could you start by giving us an overview of the BlackRock Latin American Investment Trust, ticker BRLA, and what it seeks to offer investors?
Speaker: Yes, of course. BRLA is the UK's only listed closed and investment company ah dedicated exclusively to Latin American equities. um It was launched in July 1990 and it has been managed by BlackRock since March 2006. Sam Wecht since December 2018 and Gordon Fraser since April 2025 co-managed the trust.
Speaker: um The trust shares are quoted in sterling in and the main market of the London Stock Exchange, ah while its financial statements are reported in US s dollars and its NAV is quoted in both currencies. um Its performance is benchmarked against the MSCI Emerging Markets Latin America Index.
Speaker: Now, BRLA's objective is to deliver long-term capital growth alongside an attractive level of income ah through investment in a diversified portfolio of listed companies across Latin America.
Speaker: The focus is on companies with um strong balance sheets, good cash flow generation and robust covenants um acquired at valuations that the managers believe offer attractive long-term return potential.
Speaker: BRLA's portfolio is actively managed and the managers employ a high conviction approach. Now the closed-end structure is particularly well suited to Latin America, allowing the managers to take a long-term view through periods of volatility and their frequent visits the region allowed them to uncover opportunities that may be overlooked by other investors.
Speaker: Okay, i read the last Edison research note and it suggests that Latin America has been coming out of the shadows over the past year, driven by very strong market performance. What would you highlight as a key takeaway for investors?
Speaker: um First, as mentioned, performance has been exceptionally strong. Over the 12 months to the end of February 2026, BRLA delivered and an NAV total the return. of just over 60% with the share price return approaching 70%.
Speaker: ah During that period, Latin america eque latin American equities ah significantly out significantly outperformed both global markets and emerging markets. Second, and importantly,
Speaker: Valuations remain very attractive despite the performance. um Latin American equities continue to trade at a substantial discount to global markets, around the 50% forward P discount to the US and at meaningfully lower multiples than emerging markets in general. The valuation gap versus the US market remains close to historically extreme levels. and And how is Latin America reflected in the indices?
Speaker: Yeah, so the fact that Latin America appears to have been overlooked by global investors is reflected in its index weightings. Latin America accounts for more than 7% of global GDP, but represents just 7% of the MSCI Emerging Markets Index and only around 0.1% of the MSCI All Country World Index.
Speaker: Valuations have remained depressed despite better fiscal discipline and inflation control in Latin America, along with robust company fundamentals and improved corporate governance. yeah You talked about fiscal discipline and inflation control. How important have macroeconomic factors been in driving recent returns? um Strong, hard and soft commodity prices have have clearly benefited the region, while a softer US dollar has historically provided a positive backdrop for Latin American assets.
Speaker: ah Many Latin American central banks tightened monetary policy earlier and more aggressively than their developed market counterparts. As inflation has come under control, that has created scope for interest rate cuts, which of course tends to be supportive for equity markets and valuations.
Speaker: I think when we last discussed BRLA, I think it was in October 2025, one of the themes that you emphasized was a shift towards a more pragmatic, market-friendly economic policy coming across parts of the region.
Speaker: Does that assessment still hold for 2026? but Yes, yes, that's correct. ah That theme remains an important part of the investment case. While politics in Latin America can be volatile, um the overall direction of the past a couple of years has been towards the more market-friendly right, with an emphasis on fiscal prudence, inflation control, and relatively little state intervention. At that time, you also highlighted that Latin America shouldn't only be viewed purely through a commodity lens.
Speaker: Is that still correct? Yes, that's right. And it's still worth revisiting. um Although commodities are an important component of the Latin American economy, the region also offers exposure to high quality banks, consumer businesses, infrastructure assets and fast growing digital platforms.
Speaker: For instance, Latin America is a global leader in areas such as digital payments and so financial inclusion. And there are um there there are around 300 listed companies with market capitalizations above $1 billion. dollar Okay, so let's now dive into the trust itself. What is BRLA's current positioning?
Speaker: um It is worth noting that BRLA's returns tend to be driven largely by bottom-up stock selection. ah The managers estimate this at around 60 to 70% of performance compared to 30 to 40% from macroeconomic factors. Looking at the trust positioning relative to the index, geographically over the past year, the managers have reduced the Mexican weighting and introduced a new exposure to Peru.
Speaker: ah The portfolio remains overweight Brazil, of course, and underweight Chile relative to the to the benchmark. In terms of sectors, BRLA's largest allocations remain financials and materials, which together make up around 45% of the portfolio.
Speaker: Now over the past year, the managers have increased exposure to industrials while um reducing health core weightings. um And relative to the benchmark, the trust's largest overweight is consumer discretionary with underweight positions in financials and utilities.
Speaker: um In early March 2026, BRLA was trading at a discount of around 7% to 8% to NAV and offered a dividend yield of around 4.4%. Net gearing was just under 9% versus the maximum permitted 25%, so providing the managers with flexibility to add selectively to positions when not the trenches arise. Okay, so let's let's wrap up. So how would you summarize the outlook from for Latin America from here?
Speaker: Well, at a high level, Latin America combines above-average growth potential with very attractive starting valuations. IMF forecasts point to regional GDP growth of around 2.3% to 2.4% over the next couple of years, which comp compares favorably with many developed markets. The region also stands to benefit from longer-term structural growth trends, including demand for commodities, nearshoring, and ongoing financial deepening.
Speaker: When that is combined with supportive valuations and improving policy frameworks, Latin America remains, in our view, one of the more compelling and underappreciated areas within global equity markets.
Speaker: So, Milos, as always, great to have you on the show. Thank you very much for your insights. You have been listening to the Uncovering Trusts podcast, a podcast by the Edison Group. For more information on BlackRock Latin America Investment Trust and Edison's research, please visit www.edisongroup.com.
Speaker: Thank you.
