“Those kinds of yields simply don’t exist in the US,” Anderson said. “We think a core factor behind LARE’s performance is that Latin American real estate is really under-owned by global investors, while at the same time is a favored asset by local institutional investors like pension funds and life insurance companies. This local, stable capital base means that any weakness tends to be bought very quickly since institutions abroad are just as starved for yield as investors in the US and Europe.”
Country weights include Brazil 42.0%, Mexico 41.2%, Chile 4.3%, Argentina 2.4% and Peru 1.0%. LARE has benefited as Mexico has rebounded since the U.S. elections and Brazil is going through a consolidation period.
LARE may serve as a complement to emerging market exposure or as an alternative to fixed-income positions.
“We see LARE as a perfect complement or even proxy for emerging markets exposure and as a complement to either a fixed income or domestic REIT allocation,” Anderson said. “For a more conservative investor, REITs are a natural addition to a portfolio that focuses on preservation of capital as well as attractive income. While REITs may not double in a year, they do offer rather predictable income streams and under favorable conditions like those of Mexico and Brazil, reasonable asset appreciation as well.”
For more information on the developing economies, visit our emerging markets category.