HSBC GIF Latin American Freestyle Fund tops sector

The HSBC GIF Latin American Freestyle fund has gained 76.95% since launch one year ago, positioning it as the top performing fund within its sector.

Managed by Luiz Ribeiro of Halbis, the active asset management specialist of the HSBC Group, HSBC GIF Latin American Freestyle was launched on 6 July, 2006.

Over the year from launch (until 7 July 2007), the HSBC GIF Latin American Freestyle fund’s 76.95% return positions it as the top performing among 20 funds in the Lipper UK Offshore Equity Latin America sector, which has delivered an average return of 54.2%. (Figures are quoted on a bid-to-bid basis, gross returns, net income reinvested, in USD terms, according to Lipper).

The US$101 million fund has also outperformed all onshore Latin American funds (source Lipper) and has comfortably beaten the MSCI Latin America Growth index return of 61.4% in dollar terms over the same period. HSBC GIF Latin American Freestyle is also ranked in the top 1% among all 13,349 mutual funds globally in Lipper’s universe.

Ribeiro is based in Sao Paulo and also manages the US$2 billion HSBC GIF Brazil Equity fund, also a leading performer within its sector and the world’s largest actively managed Brazil equity fund. HSBC GIF Latin American Freestyle and HSBC GIF Brazil Equity are both part of HSBC’s flagship Luxembourg based Global Investment Funds (GIF) SICAV range, which has UK distributor status and is registered for sale in more than 30 European countries. In total, HSBC has US$36 billion assets under management in Latin America.

HSBC GIF Latin American Freestyle is unique in that it is the only fund within its sector that is not constrained by benchmark weightings, meaning the manager can choose the best companies within Latin America, regardless of geographical or sector restrictions.

Ribeiro constructs his portfolio through bottom-up stock selection, seeking top-calibre companies. In particular, he seeks superior corporate governance, strong balance sheets and high quality management.

A significant contributor toward the strong performance has been the bias toward commodity stocks, which have enjoyed robust pricing amid strong demand from the Far East. Looking ahead however, Ribeiro is reducing commodity exposure in favour of consumer-related companies. He cites the rapid rise of the middle class, along with robust economic growth, low interest rates, low inflation and an abundance of credit being favourable to such companies.

Ribeiro said: “Growth in domestic demand is strong – reaching around 5% per annum – double that of the US. To take advantage of this strong growth, we favour companies which derive their income from the Latin American consumer such as those in the retail, food and banking sectors.”

Good stock selection examples include his position is Colombian based Suramericana, a group with interests in banking, insurance and food. Another key holding is America Latina Logistica, a Brazilian company involved in numerous infrastructure projects throughout Latin America.

Meanwhile, within his commodity exposure, Ribeiro favours companies which continue to benefit from strong pricing power and growing demand from overseas markets, particularly China. The fund holds PanAmerica Silver, a silver company which is trading at a discount relative to its peers.

Currently, as a by product of this stock selection, the fund is 60.1% allocated toward Brazil, 5.2% in Chile, 5% in Colombia, 14.7% in Mexico and 12% in Peru. The remainder is invested in cash.