Big asset managers are flocking to Latin American bonds and currencies, attracted by the region’s high interest rates, low inflation and more resilient economies than many had expected.
Latin America is home to five of the world’s top eight performing currencies this year, which have benefited from the region’s central banks acting early and decisively by raising rates and keeping them high even as inflation recedes. Total returns of local bonds have also surged ahead of their developed market peers, as chunky inflation-adjusted yields draw the attention of investors.
“With every month that passes the real yield is getting bigger and bigger,” said Paul Greer, emerging markets debt and FX portfolio manager at Fidelity. “So more and more investors want to put their money into Latin American currencies for that reason.”