The arrival of JPMorgan’s Brazil Investment Trust will give investors focused exposure to the country in the form of an investment trust for the first time.

The trust will have between 25 and 50 holdings and be benchmarked against the MSCI Brazil 10/40 index.
According to J.P. Morgan, the South American nation is widely tipped as the growth story of 2010, but investment has historically been lower than in other emerging markets.

Shai Patel, co-founder of financial advice firm Generation Financial Services, reveiws JPMorgan's latest offering.

The fund, which was launched in early march and has attracted nearly £50 million, is the first and only investment trust focused on Brazil. This seems surprising when you consider that Brazil is the tenth-largest economy in the world and that it accounts for almost 16 per cent of the MSCI Emerging Market Index, while China comprises 17 per cent.
J.P. Morgan believes that in the past Brazil has not had as much coverage as other emerging markets and therefore presents a tremendous investment opportunity.

It points out that the more stable business cycle and lower interest rates experienced will significantly encourage domestic investment, which will be supported by the country’s hosting of the 2014 World Cup and 2016 Olympics.
The fund managers, Sebastian Luparia and Luis Carrillo, have plenty of experience within the Latin American markets and plan to run a concentrated portfolio of 40 to 45 stocks, investing in companies that will benefit from increased domestic spending.

They have stated that they wish the fund to reflect how the Brazilian economy looks now, rather than reflect the stock exchange, and as a consequence the trust will be overweight consumer discretionary, consumer staples and industrials, but be underweight energy and materials.

When investors think about Brazil, they think the economy is commodity driven because the exchange is so weighted to this area. However, domestic consumption accounts for 60 per cent of Brazil’s GDP, demonstrating that the economy is much more diversified than the index would suggest. And the fund does not benefit from currency hedge and is therefore not susceptible to currency fluctuations.

I believe that this fund is an exciting addition to the emerging market basket. It brings many positives with it – timing, experienced managers and a unique stance on stock selection.