He buys Latin American firms that are growing faster than the market – hence the growth in the fund’s name – but equally the companies need to be profitable with good cash flow growth and low valuations. With the high cost of capital in countries like Brazil companies need to make money quickly to cover their repayments or they will not survive.
Mr Mort took charge in October after working on the fund with Dominic Rossi, the previous head manager, for two years. Mr Rossi, the heads of international equities [shares], is continuing his sector coverage responsibilities and the two still work closely together. Therefore the impact of the move on the fund’s portfolio and the investment process is likely to be negligible.
They use their proprietary system to build detailed financial models to look for potential investments. Mr Mort says: “Latin America is all about companies.
“We are fortunate that we can invest in duopolies and monopolies that are extremely conservatively managed with very strong cash flow.”
The macroeconomic outlook, especially potential interest rate moves, is also important, so Mr Mort works with Henry Stipp, the emerging markets economist at the fund group. The fund takes active sector bets against its IFC benchmark index of up to eight percentage points.
It has no restrictions on the size of its country bets. It is currently 14% overweight Mexico and 3% overweight Brazil while significantly underweight Chile where Mr Mort finds the companies expensive and less attractive than others in the area.
Investors should be aware that Mr Mort runs a concentrated portfolio with 30-40 holdings. It is also important to remember that the Latin American stockmarkets are volatile.
This four-star rated fund is one of the best performers in its category but the calendar year returns illustrate how much the returns move. For example, the fund rose 9.2% in 2001, fell 29% last year and is up almost 43% so far this year.
Mr Mort is the first to make his investors aware that the region is more volatile than most. Yet he sees the diminishing contagion among emerging markets – when events in one country help create a financial panic in another – as one of several positive signs for the region.
