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.