Five funds for Latin American exposure

The least risky way to do it (although it's still pretty high risk) is by investing in a broader emerging markets fund with a decent amount of exposure to Latin America. One such fund is Newton Emerging Income fund (ISIN: GB00B8HVZ392) which invests 24 per cent of its portfolio in the region. Fund manager Sophia Whitbread has an excellent track record in emerging markets and finds good opportunities for investing for income in the area. Her Latin American exposure is concentrated to a few companies across a few countries, though, showing how important stock selection is.

If you're looking for a cheaper option, you might want to consider a Latin American exchange traded fund (ETF). These funds offer passive exposure for investors who want to replicate the performance of a particular index. The total expense ratios (a measure of the cost of investing) on Latin American ETFs range from 0.45 per cent to 0.74 per cent - much cheaper than actively-managed funds. It's worth noting that a number of the cheapest ones are from swap-based providers that replicate the index using derivatives rather than holding the underlying companies in the index.

Most providers track the MSCI Emerging Markets Latin America index and have a heavy weighting (58 per cent) to Brazil and a smaller weighting to Mexico (26 per cent) with Chile, Colombia and Peru making up the rest. Argentina, however, does not feature at all, as it sits in the "frontier markets" index rather than the emerging markets.

So if you're going to use an ETF you really need to have an extra level of confidence in Brazil. If Brazil goes wrong, it will impact your entire investment and you'll feel the pain twice as hard as if you'd invested in many of the actively-managed funds with more diverse portfolios in the market.

Peter Sleep, ETF expert at Seven Investment Management, likes SPDR MSCI EM Latin America ETF (GBP) (EMLA) which has a TER of 0.65 per cent and iShares MSCI EM Latin America (IE) (GBP) (LTAM) with a TER of 0.74 per cent. He says these ETFs are both large, liquid, and relatively cheap to trade with a narrow bid offer spread of around 0.6 per cent.

But if you want to go the whole hog and invest in a pure actively-managed Latin American fund, the Aberdeen Latin American Income fund (ALAI) is an investment trust that has beaten the benchmark and brought in a healthy 33.8 return over a one-year period. It invests both in equities (64.8) and fixed interest (46.6). It has an annual management fee of 1 per cent, which seems reasonable given the specialist nature of the fund.

And if you do want a specialist open-ended fund, Fidelity's FF Latin America (ISIN: IE00B27YCK28) has made money over one, three and five years and is the top performer in the sector over five years. Its TER comes in cheaper than many of its rival funds at 1.4 per cent and it invests just less than half its portfolio in Brazil (48.8 per cent) and almost a third 32.8 per cent in Mexico - and is most heavily invested in financials and beverages.