Three years ago, when the US National Intelligence Council studied the global trends setting the stage for 2020, the outcome reported largely missed Latin America.
ING Latin America Equity Fund is hoping the region will deliver
MUMBAI: Three years ago, when the US National Intelligence Council studied the global trends setting the stage for 2020, the outcome reported under “Mapping the Global Future” largely missed Latin America. The potential of India and China was recognised, while Brazil found a brief mention.
Developments since then have, however, put Latin America prominently on the investment globe. So much so, while most fund houses in India are reluctant to launch any new equity scheme following the market meltdown, ING Investment Management (erstwhile ING Vysya Mutual Fund) has offered to diversify and invest in that part of the globe. Incidentally, it is the only region to offer positive returns this calendar.
The ING Latin America Equity Fund is one of the many offerings ING Mutual Fund intends to offer in its overseas fund of funds category. The fund’s corpus would be invested in the Luxembourg-domiciled ING (L) Invest Latin America Fund, which invests in stocks of companies listed in Brazil, Mexico, Chile, Argentina, Peru and Colombia.
The fund will park 65-100% of its corpus in the international ING (L) Invest Latin America Fund. It can invest up to 20% in money market instruments to take care of liquidity, while a window of up to 35% has been left open for investments in other overseas mutual fund schemes in case the Latin American market is at risk.
The scheme is open-ended and hence investments can be made even after the new fund offer (NFO) period. But, an entry load of 2.5% will be charged at all times except for direct investors.
Latin America, being a commodity storehouse, seems to be a good bet at a time the commodity-hungry nations have been finding the sailing difficult. Demand for its products comes from other emerging economies including China and India. Exports to USA are declining. Besides commodities, the region also exports services and manufactured products. The service industry is strengthened by the dominance of younger people in the age-group of 25-30 years in the region.
It also helps that Latin American equities have given a year-to-date (YTD) return of 6.12% when the Asian markets have run down 22.52% YTD and global markets by more than 12%.
The one-year return of Latin America also stands at a decent 26.55%, as per the Morgan Stanley Capital International (MSCI) Emerging Market Latin America Index.
Thus, those looking at options other than India can certainly look at the ING fund.
In terms of diversification, however, the international fund to which the collections from ING Latin America Equity Fund will be diverted offers more in terms of Brazilian and Mexican equities. Other countries get a smaller quantum of money.
ING (L) Invest Latin America Fund has been able to beat its benchmark over a longer timeframe of 3-10 years. But, near-term growth has been subdued. That is also reflective of the global downfall that most markets have witnessed.
Another point of consideration should be the international funds floated by fund houses in the country. Though these are early days for such funds, none of the overseas funds has been able to stand on its own feet yet. The DSP Merrill Lynch World Gold Fund, which ran up on the back of surging gold prices, felt the heat as the prices cooled a bit. Another overseas offering from ING Investment Management, the ING Global Real Estate Fund, has given a 3-month return of 1% while the 1-month return has been a negative 8.45%.
It is also questionable if a diversification to these international funds has actually helped Indian investors in the times they actually needed protection.
While claims are being made about Latin American region giving better returns, whether they will continue to do so is summed up in these lines from a newsletter of the International Monetary Fund: “Latin America’s potential had never been in doubt - it has achieved several stretches of rapid growth in recent decades - but all too often, policy inconsistencies have precipitated debt and financial crises.” d_khyati@dnaindia.net
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