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Fund investors buy Latin American equities

posted onMarch 2, 2021

Losses in the broader regional stock markets did not stop investors from buying Latin American  funds.

In the week ended February 24, there was a net inflow of $34 million in fresh capital for the 27 US-based Latin American-focused equity mutual and exchange traded funds monitored by Lipper, the mutual fund tracking service of Refinitiv. This inflow broke a three week streak of net redemptions.

Since the start of this year, the benchmark MSCI EM Latin America stock index has sank 9.69%. Last year, Latin American markets fell 22.0%. Brazil has been noticeably weak with a loss of 26.0%. But past performance isn't a guide to the future.

Over the past year to the end of January 2021, the average fund in the IA Global Emerging Markets sector made 16.5% and Latin American emerging market assets are expected to outperform some of their Asian counterparts' in coming quarters, as portfolios adjust for a broader rally in 2021, UBS said.

“Regionally, equity markets can catch up and post a good performance into mid-2021” Alejo Czerwonko, UBS' chief investment officer for emerging markets in the Americas told S&P Global in November 2020.

When it comes to US mutual funds invested in the world emerging market equity space, the 721 funds monitored saw inflows of $1.7 billion, extending a streak of fresh money intake to 16 weeks, the longest stretch of inflows since early 2019, according to Lipper.

However, the AUM fell by $20.4 billion, or 3.5% to $563 billion from the record high level of $583.5 billion the week prior.

Emerging market debt funds had a net inflow of $370 million. AUM of the 271 funds monitored was down by just 0.3% to $68.1 billion.

Emerging markets are an interesting place for investors prepared to accept the higher risks and ups and downs of investing there.