Unlocking Latin American Opportunities

Argentina was a home run. As much as the S&P has rallied since January 2023, Argentina has doubled it. The combination of cheap assets and a cheap currency has created opportunities for outsized returns.

There may be an opportunity for other Latin American countries to replicate Argentina’s fortunes, as four general elections are scheduled over the next year. Brazil, Chile, Colombia, and Peru could see regime changes toward business-friendly, center-right governments. These four countries currently have depressed valuations and currencies, so the potential for outperformance versus the U.S. exists, with the additional kicker of currency appreciation.

However, if a political revolution is not forthcoming, then it is better to avoid investing client money in these countries. So the question is: how can you construct a strategy that allows you to enjoy the upside of this theme without getting mired in a value trap?

With Pave, advisors can do exactly that and enjoy the best of both worlds.

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Our software allows you to construct an approved buy list containing stocks from the aforementioned countries that are also traded on U.S. exchanges (American Depository Receipts, or ADRs) and adding all the stocks that comprise your benchmark.

Of course, if you were to create a buy list solely of South American ADRs, your portfolio would be constrained by their performance, leaving you exposed if they underperform. Pave's approach is different. By including component stocks of the S&P 500 index (assuming that is your benchmark) in your buy list alongside these South American stocks, only when those ADRs begin to outperform will they enter your portfolio:

• If the theme does not play out, then you have not diminished your portfolio performance, because only stocks from the S&P 500 will be in your portfolio.
• Should a select few ADRs outperform and enhance your portfolio's risk profile even before the broader Latin American theme materializes, they will be strategically added. Those stocks will tend to be the best performers once the regional theme starts to play out.

If you want to expand on this strategy, you can populate your buy list with stocks not in your benchmark index that may appeal to your clients. For example, adding in the Mag 7 to a Russell-benchmarked portfolio, or German defense stock ADRs to an S&P 500 growth portfolio.

The possibilities are endless with Pave.

To learn more about Pave, please reach out by emailing sales@pavefinance.com or pressing the button below. We look forward to speaking with you.

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