Emerging-Market Funds Maintain High Exposure to Latin America Despite Volatility

Emerging-market investment funds are maintaining significant exposure to Latin America, continuing to favor equities in the region despite currency swings, political uncertainty and uneven growth, according to a Bloomberg Línea analysis of fund holdings and market data.

The analysis shows that Latin American stocks remain among the most consistently held positions across emerging-market portfolios, with Brazil and Mexico accounting for a large share of allocations.

Fund managers have continued to favor companies tied to commodities, financial services and energy, sectors that have benefited from elevated interest rates, solid cash generation and demand linked to global trade and supply-chain realignment, as Bloomberg Linea reports.

Several of the region's most widely held names are companies with strong balance sheets and pricing power, which investors see as better positioned to absorb volatility and shifts in monetary policy. Valuation discounts relative to developed markets have also supported allocations, particularly as earnings in parts of Latin America have proven more resilient than expected over the past year.

Fund managers consulted by Bloomberg said that exposure has been maintained not as a tactical bet, but as a strategic allocation within emerging-market portfolios, citing the region's role as a source of yield, dividend income and diversification at a time when developed-market valuations remain elevated.

That positioning aligns with broader forecasts from major banks in recent weeks. Goldman Sachs said in a recent research note that emerging-market equities are expected to outperform developed markets over the next decade, projecting annualized returns of 10.9% for emerging markets versus 6.5% for U.S. equities.

Within that outlook, Latin America is forecast to deliver earnings-per-share growth of 8.4% per year. "Earnings growth remains the main driver of performance," the bank said, adding that dividends would account for the rest of total returns.

Goldman Sachs also pointed to structural reforms, stronger nominal GDP growth and a more even global distribution of productivity gains—including from artificial intelligence—as factors supporting emerging markets beyond the United States. A weaker dollar, the bank said, would further lift dollar-based returns for investors in the region.

Currency expectations are reinforcing that view. Bank of America expects the U.S. dollar to weaken in 2026 and has highlighted Latin America as one of the most attractive regions for carry trades.