British investors have turned their nose up at Latin American funds over the past four years, clawing £5.2bn out of the region over the period. But despite a run of shoddy performance prompting the move, there’s still around £12.7bn of our money currently sitting in pure Latin American equity funds - showing even though its been snubbed by some, others are still holding out hope for returns.
But is holding out hope for Latin America sensible? We're talking about an assortment of highly volatile emerging and frontier markets - the riskiest the world has to offer. This means when these markets do shine they shine bright. The oldest Latin American funds that have been in existence for a decade or more have returned an average of 538 per cent over a 10-year period, meaning if you'd invested £100 in 2003, you'd have £638 today. That’s proof that despite the pessimism there's strong potential for returns here.
If you're going to take the plunge it should be for a long-term play. To invest in Latin America you really need to have confidence Brazil is going to prosper over the long term as it dominates the lions' share of the equity in Latin American funds. Don't be dazzled by the upcoming Olympics in Rio though. Yes, it's a feel good factor for investors in the region. And yes - the country will be thrust in to the spotlight and have the chance to flaunt itself as an influential and modern country with a 19.5bn strong population. The fact a swathe of infrastructure and logistics projects that will improve Brazil's competitiveness have kick-started in preparation is encouraging, but long-term gains off the back of such an event are far from guaranteed.