The top performing mutual funds over the last five years are dominated by Latin American funds. Of the 13 funds reporting a greater than 40% return after five years, five are mutual funds emphasizing Latin America. More impressively, the top four returns after five years are all Latin American funds with BlackRock Latin America (MDLTX) leading the pack with a whopping return of 49.4%. That means a $1,000 investment in MDLTX 5 years ago would be worth $7443.08 today. Some of the performance of these funds over the last five years can be attributed to the rise of commodity and oil prices. Much oil, minerals, and agricultural products are exported from the region. Another reason behind the Latin American fund surge is many governments have adopted sound macroeconomic policies, especially in Brazil, Mexico, and Chile where greater control over interest rates, inflation, and government spending has come about during the time period. Also, national debts have been reduced. The future does look bright for Latin American funds, but caution must be taken. I’ll elaborate on why in the last paragraph.
There is a different picture if we look at the best performing funds over a ten year period. No single focus area dominates as Latin America does over a five year period but there are several focusing on small cap and ultra-small cap or micro-cap companies. The best return rate is 21.5% for Wasatch Micro Cap (WMICX) which would make that $1000 investment worth $7018.83. The fund is very volatile, at one time gaining 30.5% over a month (July 1998) and another time losing 24.7% in a month (August 1998). However, the 5 year rate of return is 20%, and the one year rate is 20.5%, showing that for this fund, 20% or better can be expected. Averaging rates over 20% for a period of ten years paints an excellent track record for the fund’s management.
The ten year rate of return paints a different picture of the Latin American funds that dominate the five year period. MDLTX, mentioned above, has a return rate of 15.5% over ten years so something drastic happened between 5 and 10 years ago and the fund has rebounded in the last five years. If considering a Latin American fund, do the research on what companies are focused on. There are still some unstable countries in the southern hemisphere with oil-rich OPEC member Venezuela providing a glaring example. Venezuela’s government has been seizing assets of private companies recently.