LONDON (Alliance News) - Aberdeen Latin American Income Fund Ltd on Thursday reported it underperformed its benchmark for the year, as its assets decreased sharply, in a "very challenging" year.
In the year ended August, the fund's net assets decreased 22% to GBP48.8 million from GBP62.7 million.
Aberdeen Latin's net asset value per share at August 31 was 70.34 pence, a 22% fall from the 90.40p achieved the year before.
Aberdeen Latin's NAV total return retreated 19%, lagging behind its benchmark's negative total return of 11%.
The fund measures itself against a composite benchmark index weighted 60% to the MSCI EM Latin Americ 10/40 index and 40% to JPMorgan GBI-EM Global Diversified.
The fund said the region faced an "onslaught of bad news" over the course of the year.
In particular, the Argentinian peso's "tailspin" and the Brazilian government's "mishandling" of a trucker's strike.
As a result, "contagion" gripped investors who sold off assets "rather indiscriminately".
The region's weakness was compounded by the liquidity squeeze on the US dollar. The US' policies on global trade saw Latin America suffer a fallout, as Mexico and Brazil were subjected to 25% tariffs on steel exports to the US.
Aberdeen Latin said its fixed income and equity portfolios weighed on overall performance.
In fixed income, the fund's exposure to Argentina had a "large" negative contribution, as the peso halved in the year.
Aberdeen Latin said its gains from its long dated Brazilian bonds were "completely wiped out" by President Michel Temer, who "sacrificed reform momentum to protect his presidency" amid corruption allegations.
In equity, stock selection in Brazil was the primary cause for the portfolios underperformance. In particular, the fund not holding state-owned oil giant Petrobras was the key driver of underperformance.
Aberdeen Latin is paying dividends of 3.50 pence, flat on the year before.
Chairman Richard Prosser said he was "cautiously optimistic" about the outlook for the fund.
Prosser said: "Global appetite for risk assets has abated somewhat on the back of higher interest rates in the US and normalising monetary conditions elsewhere. The deepening trade divide between Washington and Beijing will likely continue to influence commodity prices and stifle investment activity.
"In Latin America specifically, uncertainty surrounding Brazil's incoming administration will keep investors on edge, while roadblocks to reform in Colombia and Peru could trigger further sell-offs. At the same time, the path to recovery in Argentina will be bumpy, given waning confidence in President Macri's gradualist policies."
Shares in Aberdeen Latin were down 2.5% Thursday at 63.20 pence each.