Just how well—or not so well—Mexico’s President-elect Claudia Sheinbaum may be able to tackle the country’s prevailing challenges is still up for debate. Sheinbaum’s commanding margin of victory in the June election discouraged some investors amid fears that her ruling Morena party could potentially push through constitutional reforms that may adversely impact Mexico’s business environment.

Since the outcome of the US presidential election will remain undecided for a month after Sheinbaum takes office in October, we expect Mexico’s equity markets to experience more short-term market volatility. But given Mexico’s ongoing potential to capitalize on nearshoring investments and Sheinbaum’s track record of progress during her time as mayor of Mexico City (beginning in 2018), we think investors should be monitoring opportunities to enter this compelling market.

We believe a continuation of US macro drivers are still poised to drive Mexican exports. Although US appetite for Chinese imports was still high even as recently as 2022, the drop-off in trade with China since then has benefited Mexico, which recently eclipsed both China and Canada to become the biggest US trade partner.

Mexico’s first female president

A protégé of outgoing President López Obrador (or AMLO as he is known), Sheinbaum has pledged to continue along the political course of her predecessor. But as a climate scientist with a Ph.D. in environmental engineering, she appears to us to be more attuned to pressing issues, such as Mexico’s water woes and efforts toward the energy transition. She has demonstrated deep, technical expertise and perspective on vital issues—“not simply as stewardship of natural resources, but also as an issue interconnected with education, social justice, health care, housing and infrastructure,” according to the think tank Atlantic Council.

There is hope that the public-private partnerships that Sheinbaum advanced during her time as Mexico City’s mayor could be a model that she adopts and adapts in her new administration to increase the number of strategic projects. These may include opening natural gas production and transportation to private participants, boosting infrastructure and more renewable energy projects that are critical for Mexico to take advantage of nearshoring-related investment opportunities.

Since renewables like solar and wind currently make up only about 12% of the electricity mix in Mexico (significantly lagging the 16% share for the United States), there is great potential for the country’s clean energy buildout. Sheinbaum has pledged to change course from AMLO in her approach to speeding the promotion of renewable energies with a US$13.6 billion investment plan through 2030 that includes pioneering development of smart grids and other green technologies.

Experts have praised Sheinbaum’s methodical approach to governance, for example, bringing stability and predictability to regulatory frameworks with her technical background and reliance on seasoned advisors.

Among some of the moderate-to-high risks for Mexico is public security and crime. Here again, Sheinbaum’s approach in working with US counterparts during her tenure in Mexico City has been applauded. Her cabinet picks for key positions thus far present an even gender distribution and draw from academia and her mayoral administration—in a bid to repeat the successes in crime-fighting she achieved during her years as mayor. These include veteran politicians Omar Garcia Harfuch for Security Minister, Marcelo Ebrard for Secretary of Economy and Alicia Barcena for Secretary of Foreign Affairs.

Mexico poised for economic growth

Over the near term, Mexico is expected to achieve a 2% growth rate—higher than its 20-year average.

Although Mexico’s headline inflation accelerated beyond analyst expectations in June, its strong trend of domestic demand and high consumer confidence should also offer some economic momentum, in our opinion. For example, June auto sales were up 8.3% from a year earlier, according to government data.

It’s also important to recognize that Mexico is the second-highest receiver of remittances—transfers of money from migrants working abroad—in the world, behind only India. For the decade leading up to 2020, the percentage of households in Mexico that received remittances rose to 5.1% from 3.6% in 2010.5 Last year, remittances to Mexico notched a 7.6% increase, hitting a record US$63 billion, due to a strong US labor market.

Lead sponsors: Investors Trust

Sponsors: Hansard, Canaccord Genuity Wealth Management, Marlborough

Venue sponsors are Zonamerica (pictured above).

Associate sponsor: Block Asset Management 

After two well-attended and popular events in Miami, we are delighted to bring the Investment International Latin America Forum to the southern cone of the region for the first time, in the thriving financial centre in Montevideo, Uruguay.

This event is an essential forum for all leaders in the advisory and brokerage world and for all professionals within the international wealth management community.

Investors Trust are partners and lead sponsors for the event for the third year in a row.

Gary Robinson, Publisher and Co-Owner Investment International, said: “We are incredibly proud of this event which, with the support, energy and ideas from all of our partners, lead admirably by Investors Trust, has grown year on year.

“And indeed, we are so pleased to be able to bring our II Lat Am Forum 2024 to the southern cone this time. At the core of our philosophy at Investment International is one word: collaboration.

And this event is a perfect example of how third party independent global publications like ours can work with the industry in a collaborative way to bring everyone together in one place to discuss the key changes and future opportunities within the cross-border world in this region.

Additional Sponsors again for the third year in a row are Hansard, Canaccord Gennuity Wealth Management, with further sponsors and speakers set to be revealed in the coming weeks 

This years event will also be bi-lingual for the first time with the majority of the event being held in Spanish.

To register your interest for this event to grab one of our a limited number of delegate tickets click here. Or email admin@investment-international.com.

Drawing on his 25 years’ experience in securities services, funds services and capital markets, he previously held senior leadership positions in Citi, Canada Life, HSBC, SWIFT and B3 (Cetip), and more recently has been advising and providing customized services to foreign private and institutional investors holding investments in Brazil.

Following the adoption of CVM Resolution 175, Brazilian investors now have the opportunity to access a broader range of offshore fund products, while international investors gain access to local Brazilian funds.

This expansion significantly enhances the prospects for all participants in the local funds market, Calastone said, adding that it “enables firms to achieve cross border connectivity to international fund markets via its unique global fund network, which also supports local market connectivity”.

Calastone chief commercial officer Brian Godins said: “I am delighted to welcome Nelson as Head of Calastone’s business in Brazil. Brazil is one of the largest and most important global players in the funds market with an industry net worth of over BRL 8 trillion.

“As the largest global funds network, Calastone is uniquely positioned to support local firms’ growth ambitions as they seek greater automation and efficiency. Nelson’s breadth of industry experience will be key in helping our clients in Brazil evolve their business models as they tap into domestic and cross-border investment opportunities, particularly in light of the implementation of CVM 175.”

Nelson Eduardo Pinto Pereira, Calastone Head of Brazil, said: “I am excited to join Calastone at such a pivotal time for Brazil’s funds industry and to collaborate with a team at the forefront of digital innovation in funds. I look forward to leveraging Calastone’s connectivity and technological capabilities to introduce greater efficiencies and to help our clients in Brazil reduce complexity, risk and cost as they take advantage of new levels of automation and simplified whole market connectivity.”

The 39 reaching the status make up 2.8% of funds, a decrease from the 3.9% of funds reaching a top-quartile performance in Q3 of 2023. Historically, the percentage of funds with top-quartile status has sat between 2-4%. While the number of specific funds with top-quartile performances decreased in the final quarter of the year, only two of the Investment Association’s 56 sectors failed to achieve positive total returns, on average.

Kelly Prior, investment manager in the multi-manager team at Columbia Threadneedle Investments, said: “Consistency faltered in the fourth quarter as the mood music again took on a different tempo. Having failed to respond to expectations of a change in rate outlook for much of the year, the final Federal Reserve meeting of 2023 offered a more dovish tone.

The Japan sector had the largest number of funds which reached top quartile, with 12.3% of the funds sitting within that group. Japan also had 32.3% of funds that performed above the median over three years.

“Japan proved to be something of an outlier in 2023,” Prior said. “A market often forgotten due to its ever-decreasing importance in global indices, it continues to prove a rich hunting ground for active management.”

See also: Square Mile: Nine funds poised for success in 2024

The two sectors which recorded negative performance in the fourth quarter of 2023 were China/Greater China, which fell 8.4%, and UK Direct Property, which lost 0.2%. The greatest returns came from the Latin America sector, up by 12%, and the Technology & Telecom sector, returning an average of 11.8%. Property Other also saw strong gains, with an increase of 10.3%.

“As we peer into our tea leaves for inspiration for the year to come it strikes us that we may be nearing a time to be brave. China, the standout underperformer this quarter, looks ripe for a change of sentiment while India is priced for perfection, and if private equity needs to start deploying capital, then smaller companies are viewed as a steal, particularly in the UK,” Prior said.

“High yield has been fabulous but when floating rates start to bite there will be winners and losers, and emerging market central bankers have been ahead of the curve in hiking and then cutting interest rates while their developed market cousins sat on the side lines. Indeed, a change in the fortunes of the ‘Magnificent Seven’ stocks could result in a change in consistency outcomes for US equity funds too.”

This article was written for our sister title Portfolio Adviser

Fuelled by the Nasdaq hitting record highs, the IA Technology & Technology Innovation sector recorded a 39.29% return for the calendar year placing it top of the sector rankings, while the IA China/Greater China finished bottom with a fund average fall of 20.35%.

“I don’t think many thought tech would be the standout performer of 2023, I certainly didn’t,” said Ben Yearsley, director at Fairview Investing. “In what was a surprise to many, the never never rally of a few years ago has reappeared with the Nasdaq reaching an all-time high.”

Largely driven by the performance of the ‘magnificent seven’, the Nasdaq ended the year returning 45.44%, making it the best performing index of the year.

Elsewhere from a sector perspective, IA Latin America finished second in the rankings with a gain of 23.23%, which Yearsley noted was possibly driven by a weaker dollar in the absence of commodity bull run.

See also: Sector in review: IA £ Strategic Bond

Taking the bronze medal for the year was the IA India/Indian Subcontinent sector, which registered an average fund return of 17.05%, with the North America (16.75%) and Europe (14.08%) sectors completing the top five.

Despite registering the biggest loss in 2023, Yearsley expects sentiment to China “must change” at some point with shares looking “ridiculously” cheap and recently India overtaking Hong Kong in market-cap terms.

“China funds dominated the bottom 10, bottom 20 and bottom 30 performers,” he said. “The only other notable theme at the bottom was energy transition and solar related funds. These stocks had a perfect storm in 2023 of rising rates, falling power process, and increased costs.”

See also: Markets can still thrive with higher interest rates

While 2023 didn’t turn out as most predicted, looking forward Yearsley said 2024 promises to be a fascinating year with politics dominating the picture.

“Will Donald Trump regain the presidency? Will Keir become UK PM? And will Europe head to the right?” he said. “Probably the only certainty is Modi winning another term in India with a currently high-flying economy and stockmarket.”