Fund managers are trimming commodities exposures in favor of consumer and other industries, a survey of leading managers has found.
As minerals prices trend down, top fund managers in LatinFinance’s 2013 equity investor scorecard say they are reevaluating prospects for long-term returns. A strong correlation between LatAm indices and commodities ones opens questions over the logic of following the benchmark, they say, as managers turn increasingly to consumer industries.
Schroders’ Latin America Equity investment fund has been underweight on energy and materials, particularly large caps with scope for government intervention, said manager Nicholas Morse.
“Our focus has generally been on mid cap companies, where you’ve got a more predictable demand picture,” he said. “Commodities have been pretty unpredictable.” The fund ranks sixth in the equity investor ranking.
Brazilian asset managers are taking a similar strategy. Brasil Capital, which has the best performing equity fund in LatinFinance’s Brazilian investor scorecard, has built up positions in companies it likes. That includes consumer firms in education and consumer goods.
“We are still very bullish on the consumer sector,” said Bruno Baptistella, portfolio manager at Brasil Capital.
Some debt fund managers are also keen to participate in LatAm’s consumer boom. There is real value in the briskly growing financial intermediation story across LatAm, said Blaise Antin, head of sovereign research at TCW, whose Emerging Markets Income Fund ranks fourth in LatinFinance’s debt investor scorecard.
“Credit penetration is still quite low in much of Latin America. We think it’s on a positive upward trajectory, and we want to be part of that story,” Antin said. “The deleveraging we’ve seen in Europe and the US is not something that we see in Latin America. Latin American banks came out of the Lehman crisis in reasonably good health with most LatAm banks traditionally employing a very plain vanilla business model.”
See the rankings and read more comments from the top fund managers:
Debt investor scorecard: Beating the benchmark
Equity investor scorecard: Bargain hunters
Brazilian investor scorecard: Sitting tight