Based on the following entry from last year, I would like to briefly show how I approach long-term, strategic investments.
The position is currently up 44%. The initial purchase was based on valuation considerations and the concept of mean reversion - specifically on the basis of analyses by Research Affiliates. The TER is 0.2%, which is higher than the cheapest ACWI/World ETFs, but a far cry from expensive sector or strategy ETFs.
Round 1 - Valuation
Research Affiliates is a US investment firm, best known for Smart Beta and the Fundamental Index. They offer a freely accessible tool called Asset Allocation Interactive (https://interactive.researchaffiliates.com/asset-allocation), with which you can put together portfolios from various asset classes and estimate expected returns - both nominal and real.
In the screenshot below: 10-year expected return, nominal.
Brazil, Mexico, Chile and Peru make the highest expected contribution to overall performance. US Large Cap, on the other hand, performs weakly; US Small, Europe and Emerging Markets are close to each other. I would currently underweight India - I am convinced by the long-term case, but the valuation is currently too high. Only when the chart turns.
Round 2) The macro case
In addition, I listened to a podcast by Luke Gromen (Forest for the Trees) in the fall, in which he put forward two structural theses for Latin America:
First, commodity arbitrage: Latin America benefits from the world moving away from a dollar-only system and real tangible assets regaining importance. The region is sitting on enormous resources that are being repriced in this environment.
Secondly, geopolitical neutrality: Latin America is not in direct conflict between the USA and China and can pragmatically sell resources to both blocs - which should structurally strengthen local currencies and economies.
The position is currently very small - but I am considering where and how to increase the position, as I am convinced that the investment thesis can be thought of over 1-2 decades.
What do you think?
