Transcription
Good afternoon, ladies and gentlemen, and welcome to the Black Rockck Latin American Investment Trust PLC investor presentation. Throughout this recorded presentation, investors will be in listenon mode. Questions are encouraged. They can be submitted at any time via the Q&A tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and we'll publish our responses where it's appropriate to do so on the investor meet company platform.
Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to lead manager Sam Vet. Uh Sam, good afternoon, sir.
>> Good afternoon. Thank you very much uh for hosting uh us today. Uh I'm going to be talking briefly about the Latin American Investment Trust about the outlook for uh this part of the world in general the outlook for its markets. Um and that'll be sort of the formal part of of the presentation and then uh we will go to Q&A. So without further ado, there are about 14 slides in this deck. Um and we're going to go through them.
So uh as a reminder for those not familiar, this is an investment trust investing across Latin America. Latin America is not just Brazil and Mexico but it is also the countries that sometimes get uh forgotten whether that is Chile, Colombia, uh Peru, Argentina uh but also uh other places in Latin America in the Caribbean um in Guyana, Ecuador where we're looking across the range of different countries uh in uh Latin America and we have an investment trust structure that is really good for investing in places uh where there's an enormous amount of volatility. Uh I have been at uh BlackRock and its predecessor firms for almost 25 years now and I manage this trust alongside Gordon Fraser who I've been working with for 18 years.
And if we go on to the next slide, uh we can just get a sense of how volatile Latin America has been over the last few years. One of the interesting uh and rather strange features of Latin America over that period of time has been the fact that the performance has pretty much correlated perfectly with the years. So 2023 was a really strong year for Latin America with the market reaching a high right at the end of 2023. Uh 2024 was the exact reverse with the market starting at its high for the year and ending at the low for the year. Um and 2025 uh once again uh has been the reverse of that with the market starting at its low uh and pretty much going up in a straight line uh ever since. The reason why I highlight this is that any uh comparison that one does uh for this fund or others when it comes to Latin America has this strange uh annual aspect to it over recent years. Uh what's also true at all points through time over the last 25 years has been this has been a very volatile part of the world.
Um and if we go forward a slide um we can get a sense of one of the reasons why this part of the world has been quite so volatile that fact that that is the fact that they are a series of democracies in Latin America while the rest of the world um doesn't have uh too many democracies in the emerging world. We can think of places like China and Russia which are very far from democracies. Latin America has a series of democracies where political leadership changes sometimes for the better, sometimes for the worse. But what we do have in Latin America are countries that are not fighting each other and countries that are beneficiaries o of the world splitting into three. It's one of the sad realities of the world that we uh live in in 2025 which is different to I guess what we've experienced for much of the last 30 years. The world is splitting into three between the east we can call that Russia, China, um Iran and a few other countries. The west we can call that the US, the EU, the UK and a few likeminded countries. And then we have a large number of the 194 members of the United Nations that are neither west nor east. And many of these countries are are doing quite well by being able to trade with both sides. We'll come back to that point a little later. But as I said, these countries are democracies and in the next year or so, we are likely to see a significant political change in quite a few of these countries. Uh perhaps the exception, one of the big exceptions is Argentina where Aim Mele much derided by many before he came into office but now celebrated by many for what he's able to achieve in Argentina is likely to be in power till at least uh October 27 for the next two years. But uh President Lula of Brazil, uh President Bish of uh of Chile, uh Petro of Colombia and Buate of Peru are all likely um to be uh challenged very significantly in elections that are upcoming in the next 12 18 months. And in the polls are to be believed um it's highly likely that none of those four will be in power 18 months from now. Um the most significant of those uh would be President Lula in Brazil. He is a 79year-old man with health issues. Um I would argue that the last 12 months have shown that 79year-old men with health issues don't always do well uh in electoral uh cycles. Um the one other person who's likely to remain in power is Claudia Shinbal. She was elected last year for the sixyear single term that Mexico has. Uh, and she's actually quite popular in the country. So, she's likely to change.
The reason why I highlight all of this extant is sometimes people say one could just buy good companies uh, in Latin America. For us, it's really important that we have a view on the politics, the macroeconomics, the fixed income, the currency, and only then the equity because the equity is a very small number between two big numbers, namely assets and liabilities. So if there's going to be political change, it is very significant for our countries. And I would argue that one of the reasons why uh some of these MS have done very poorly over the last few years has been poor political leadership. Uh and I think some of that poor political leadership is very likely to change uh during the next 12 18 months which should provide a good backdrop for the equity markets in these countries.
Um if we go into detail on the next slide in in in a couple of these countries starting off with Brazil which is the biggest economy and biggest market in Latin America. Uh as I indicated earlier 2020 uh 4 was a very bad year for the market despite the fact that inflation wasn't particularly high and growth exceeded expectations. The stock market had had a terrible year and many stocks despite reporting very good results saw their shares plummet to the lowest levels for 10 or even 20 years. And so one of the things that we think will happen in Brazil over the next 12 18 months is that interest rates which have been amongst the highest uh real interest rates in the world are likely to be falling which is going to be helpful for liquidity in the market. um and those really low valuations that we can see on the bottom left of this screen. We can look at the Brazilian market uh in red or the Brazilian market uh removing uh the two biggest commodity companies namely PCA bus and Valet. Either way, as one can see uh the market is amongst the cheapest it's ever been. So, a lot of people have almost given up on Latin America. We would argue that's not a particularly wise thing to do. We would argue that buying Latin America at these discounted uh valuations is a good idea especially as one can see on the bottom right of this slide that many of the stocks in the region especially the consumer names have actually been surprising on on the upside um and that supported share prices. So in a nutshell when we think about Brazil uh over the next 12 18 months it's going to be a country where we are likely to see political change. is a country where inflation is coming down and interest rates are going to come down in all likelihood. It's a country where many companies are actually doing fairly well. It's a country where valuations are really cheap. Put that all together a and wearing my emerging market hat. It's one of the countries we are most positive across all emerging markets let alone Latin America. So a strong light for what we see in Brazil. Not that everything's perfect there. Uh but I think the combination of of of of reasons that I highlighted a minute ago are really quite compelling. And so um we like within Brazil, we like domestic Brazil, we like consumer names, we like financial names. Nothing really wrong with the exporters. Uh but we think it's the domestic story that is the most exciting for the next 12 to 18 months.
If we go on a slide, talk a little bit about Mexico. Mexico less volatile than Brazil. I was there just a couple of weeks ago and uh you can probably see a picture of me uh outside uh the economics or finance ministry. Uh the focus of many people in recent weeks and months has been what's going on uh with the US negotiations with the Trump government. We think on a sustained basis Mexico is likely uh to enjoy better relations with the United States than let's say China. To that end, the Mexicans who will always be able to produce goods cheaper than the Americans will continue to trade extensively uh with the United States. Uh we don't think there's going to be massive new uh tariff barriers put up between those two countries in North America. And we can't help but know that once again here the next 12 months multiple of the um uh of the market is very low compared to its own historic standards and the fiscal situation is actually fairly good. Uh I think people in the United States would love to have a fiscal balance of roughly zero a primary fiscal balance of roughly zero and that's what we are seeing uh in uh in Mexico. So uh the summary of Mexico is great manufacturing base. Trade relations with the US may get slightly worse but clearly going to be better than what we see uh with China and the market is once again extremely cheap.
If we go on to the next slide just about some of the Andian countries um nothing really wrong with most of them with the exception of Colombia. Come back to Colombia in a second. It's just on a relative basis. Brazil and Mexico look so much better than Chile. There will be a governmental change uh uh from left to right or or or center right uh during the course of this year. Markets already sort of perhaps looking forward to that. The market isn't particularly cheap. So nothing wrong just less exciting. Peru a small universe of stocks again political change there but nothing terribly good or terribly bad there. Colombia uh is a place where we have zero exposure. We've seen the horrific assassination attempt on uh a leading political figure in in recent days. We've seen an upsurge in violence. Uh the government of pro uh as welcomed as he was by various people in the media uh a few years ago has not done a good job of leading that country. The fiscal situation has got worse. They are abandoning potentially their fiscal rule. Um and that is coupled with um real problems about output uh given the fact they've tried to move away from oil and coal which are two uh important uh commodities that the country's historically produced. Add to that not just the political violence which we've sadly seen recently, but an upsurgent violence uh between various gangs in in in in the border area uh near Venezuela and various other uh uh parts of the country which have become more lawless than they've been for 30 years and the outlook for Colombia sadly is not very good at all.
Um in terms of uh performance I I did highlight uh earlier the fact that 2025 has seen a big uh positive move for the market. Uh we've actually added quite a lot of alpha during that period of time and uh and that's actually been helpful for the long-term uh track record. fact that said uh if one looks over a much longer period of time these markets have massively underperformed the United States uh for the last 17 18 years. In fact the people uh in who work in finance who are younger than 40 have never seen Latin America outperform the United States for a sustained period. We would argue we are due to see a sustained period of outerformance from Latin America uh after 17 18 years in a bare market. Uh and the reasons for this are fairly straightforward and that's in part for the political changes I outlined at the beginning about how the world is splitting into three. Uh partially because we're going to see uh um better politicians running these countries I would suggest in the next 12 uh 18 months. Uh and also because unlike the United States we don't have uh very large imbalances be they fiscal uh be they on the current account side. Uh so we're looking at a a collection of countries which I said right at the beginning are democracies have growth um and don't have the same uh political challenges or economic challenges that the United States has and of course at a much lower valuation in terms of how we are exposing the portfolio to very diversified collection of sectors. Sometimes one thinks um you know there's just of one or two sectors represented. I think this slide uh and and its series of colors indicate that the portfolio is really diversified across a range of of sectors and that is very welcome for us.
Um in terms of sort of how this has moved historically, I think this just gives uh investors a longer term taste as to how the fund has been managed. Uh a lot of different colors here over a lot of different periods. It just shows you how uh the sectoral breakdown of the funds has moved over the last uh 10 11 years. Uh and as one can see uh it really has been a diverse exposure to the wonderful opportunities in Latin America over that period. Uh in terms of the biggest stocks in the portfolio um really across a range of sectors as you would expect. Uh uh some of these names will be familiar to people uh but others like Ready Door in the healthcare sector or or perhaps XP to some as a uh leading financial company out of Brazil may be less familiar. Uh there are so many opportunities in Latin America and we are very privileged to be able to travel to the region uh and meet the CEOs and leaders of these companies.
And just a reminder of the dividend policy um for the last and now seven years uh we pay a regular uh quarterly dividend uh equal to 1.25% of the NAD at the end of each calendar quarter. So that's sort of about 5% a year. Um and that's important um uh in terms of 5% of the NAV of the fund. And as as mentioned here based on the trust share price at the end of December 2024, the trust offered a 7% dividend yield. Obviously the share price has gone up a little bit since then.
Um these are the risk warnings that people should absolutely bear in mind. Uh but with that uh I think I'm going to conclude the formal part of the presentation uh but with a reminder uh that this is the part of the world with growth valuation support uh political change ahead which I think will be broadly positive global political developments being helpful um and I think it's time after 80 years that people look at Latin America a fresh thank you.
>> Perfect Sam that's great and thank Thank you very much indeed for your presentation this afternoon. Um ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right hand corner of your screen. But just while the company take a few moments to review those questions that have been submitted already, just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can all be accessed via your investor dashboard.
Um Sam, as you can see there, we have received a number of questions. So um perhaps if we dive straight into it, um the first question that we have here reads as follows. Um, Latin America appears to be somewhat insulated from recent geopolitical tensions. Do you think this trend is likely to continue? And if so, what factors might support this?
>> Yeah, I think Latin America is probably more insulated than other parts of the world. Um, one, it has uh fairly few enemies. So, if we think about China, obviously there's real tension between China and the US, but also between China and the EU. Uh if we think about the United States, they're probably not getting on too well with China. Uh not getting on too well with other parts of the world today. Either Latin America generally, we think about the Brazilians and the Mexicans and others, they are welcomed uh in capitals uh and in trading uh locations around the world. Um because they are democracies, because they're not viewed as a threat and geographically they're perhaps away from some of the uh global hotspots. I think the geography of Latin America being sort of the bottom left of maps as we often view them uh isn't going to change. Uh and I think whether we have left or right-wing governments uh in in power in Latin America. Um I I I think the fact that uh Latin America is is insulated to some extent from from all the geopolitical tensions that we see globally is pretty supportive the investment case for Latin America itself.
Thanks. Um, just turning to the next question that we have here. Um, how do you navigate the political risk in these countries, especially considering the many elections coming up over the next 5 years?
>> Political risk, as I indicated earlier, is absolutely central to the way we think about investing in these countries. Um perhaps it's worth adding when when there's real problems and the currency in any of these countries falls 10% the market is corre and falls 20% and one loses uh close to 30% in a very short order. So understanding political is critical and that's why when we travel to these countries uh we meet people from all political persuasions uh leftwing, right-wing far leftist. Now I was uh in um Borgata in Brazilia and Buenos Aires. I'm not sure why it was threebs, but it was uh and I met people across the political spectrum to understand what's going on. But it's not just politicians we meet. We meet uh trades unionists, student union leaders, we meet a whole collection of people, be it the people with the blackards or be it the people against those with blackards. um to give us a sense of what's going on in these countries and and having built up these relations with journalists, statesmen uh and and members of civil society over a long period of time, they really give us a very interesting not always uh easy to swallow, but an interesting insight to what's going on in these countries. So, politics has been an issue for the last 25 years in Latin America. it will continue to be an issue for the next 25 years and beyond uh in Latin America because these are democracies and democracies uh people can vote for change and change is not always something that people in the market enjoy. So it's critical to follow developments to understand to meet with the politicians long before they become the prime ministers and the presidents because that way they will actually understand the extent to which their policies are sensible or not and the extent to which they're going to be able to implement those policies or not. Um and that's one of the things that we uh spend a lot of time doing. Politics absolutely critical when we think about our portfolio. Even though about 60 70% of the risk of the portfolio is built bottom up from the stocks themselves, there's a significant 20 30% which is a function of our top down views. Uh and you know perhaps because of our concerns of Colombia for example, we've got no exposure there. Uh one of the things we're excited about uh will be some of the other countries Latin America where we see political change moving uh in a market supportive direction.
>> Thanks Sam and and and just sticking with that we've got a question here which asks how do you gain a holistic view of the companies you invest in? Do you travel to meet these companies on the ground?
>> Yeah absolutely critical that we do all members of our team travel and have been to Latin America many times. Um, so I've been to pretty much every country with a market or or every country that we have exposure to uh in Latin America. As I said, it's not just the six countries that in the index, but it's also Uruguay and Ecuador and Guyana and Costa Rica um and Panama, all sorts of places that we have investments or have had investments that other people are not looking at. And when we travel to these countries, it's important we don't just meet the companies, we meet the customer, the suppliers, the competitors to understand the entire value chain of of of of the companies that we invest in. Uh typically companies management are not uh unlikely uh to tell you when there's a problem. That's why it's critical we meet uh a whole whole range of people and get as you mentioned a holistic view of what's going on in that company and across the sector it operates in.
Perfect. Thank you. Um, how has the recent dollar weakness impacted the countries in Latin America and do you see continued dollar weakness going forward?
>> Um, so the the recent dollar weakness after years of ongoing dollar strength really shouldn't come as a surprise to us given the challenges that we see in the United States. Um, it's been somewhat positive for the Latin American markets, but that shouldn't be the reason why I want buying Latin America. I have no particularly strong view on the direction of the dollar. Um I think very few people have called the dollar correctly over time. Um and I I doubt I'm going to be one of those. That said, economic logic would determine the dollar should weaken, but that wouldn't be my central scenario. Uh I'm prepared to uh judge the stocks and markets be invested on their own merits. And my general view to building a portfolio is an assumption the dollar doesn't really move very far from where it is currently.
Thanks. And we have a question here um specifically on Brazil uh which asks, "Brazil has done fairly well so far in 2025. Are you still positive on this market?"
>> Very. Um I think we came from such a low base. Um and we haven't even got back 2024's losses and and as I indicated earlier, we're sort of at 20 year absolute lows uh for many stocks uh at the end of 2024. And even just despite the bounce we've seen so far year to date, uh many of these stocks are are still unbelievably cheap. So Brazil would be my preferred company. It's going to be volatile. It's going to have a rocky road into the elections uh for 16 months from now, but that doesn't necessarily mean it should be ignored. Uh risk and opportunity are somewhat correlated uh within uh Latin America and within markets as a whole. Um a and I remain pretty positive on Brazil. Uh but it will probably be the most volatile market in the region over the next 18 months, but probably the best performing two.
>> Perfect. And perhaps one final question uh to wrap up on. Um looking back at your career in investing in Latin America, what surprised you the most about these countries?
>> What surprised me the most probably in in my in my uh career is just how badly these markets have done. I if you would sort of um spoken to me uh let's say seven years into my career and said over the last seven years you know look at uh Mexico City look at Bogota look at Wes Irish look at the Brazilio Sa Paulo look how far these country these cities have moved in the last seven years um and look what's happened to their markets there would have been some uh correlation between the economic developments in the country and and what's happened in the markets what's really interesting is since 200 2007 2008 that has completely disappeared. So even though the people in these countries have got richer, even though the the the cities in these uh countries look completely different, even though we've seen an enormous adaption of uh to different ways of working and adoption of technology across many of these countries, the shares uh of the companies in in in these countries gone absolutely nowhere. So I I think that that would probably be the biggest surprise uh would be that if I had correctly forecast the economic outlook for these countries in 2007 for the next 20 years, there is no way I would have called that these markets would have done this badly. So when I think about what surprised me uh um other than matters relating to football, which is what always surprises me, um I I would argue that it's just how badly these markets have done for so long. Any market can do badly for a period of time for market to do this badly for this long um has really surprised me. And I think the reason for that is that there's sort of this uh uh hoovering effect or vacuum cleaner effect if one prefers uh of how everyone has put all their money into the United States because it always goes up and that's taken money out of Latin America on a sustained basis. I think we're going to see a little reversal of that going forward and that's another one of the reasons why I'm pretty positive about the outlook for Latin America.
>> Sam, that's great. And thank you very much indeed for being so generous of your time there and addressing all of those questions that came in for investors this afternoon. Um, but Sam perhaps before really now just looking to redirect those on the call to provide you with their feedback which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with that would be great.
>> Yeah, I I would just say Latin America is a great place to invest for people with a medium-term horizon. One should not be investing in Latin America. One wants to make a quick buckle on wondering what's going to happen in the next month or two. Um because these are extremely volatile markets. Investors in Latin America will get very good returns providing they are patient and providing they genuinely have a three to five year time frame. Uh we are very positive on the outlook for the Brazilian market over the next 12 18 months. There will be bumps along the way. Uh but there's no such thing as return without risk. Also quite positive on Mexico some of the smaller countries. Uh but let's say the Andian market look quite up with events or or or possibly um not the best place to be investing today. We are excited for the region as a whole. It's been uh ignored by many for 17 80 years. We think it's time to look at it again and for people who can uh withstand volatility and for people that have a medium-term horizon and this is a great place to invest.
>> Perfect Sam. That's great. Thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete but I'm sure be greatly valued by the company. On behalf of management team of the Black Rockck Latin American Investment Trust PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.