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Below is our recent interview with Alberto Osorio, CEO at The Mexico Fund:
Q: Could you provide our readers with a brief introduction to The Mexico Fund?
A: Incorporated in 1981, The Mexico Fund is a closed-end Fund that trades on the NYSE under the ticker MXF. The investment objective of the Fund is to seek long-term capital appreciation through investment in securities, primarily equity, listed on a Mexican Stock Exchange. Impulsora del Fondo México S.C., the Adviser of the Fund, is a Mexican company registered as an Investment Adviser with the SEC, and has been the Fund´s Adviser since its inception.
Q: You’ve recently announced that the Board of Directors (Board) increased the quarterly distribution; could you tell us something more?
A: Since 2008, the Board authorized a Managed Distribution Plan (MDP) which provides investors with quarterly distribution payments. During the last three months, the Fund has benefited by two developments: positive results regarding Mexican Presidential elections and a favorable outcome on trade, as Mexico, United States and Canada reached a deal to modernize NAFTA and established a new trade agreement called United States-Mexico-Canada Agreement (USMCA). As a result of this positive environment, the Fund was able to realize sufficient capital gains to offset the prior year´s capital-loss carryforwards, and will be able to resume distributing investment income and realized capital gains. Accordingly, the Fund´s Board decided to increase the quarterly distribution from $0.15 to $0.25 per share, an increase of 67%; this amount is equivalent to an annualized figure of $1.00 per share, which at today’s market price translates into an attractive 6.2% dividend yield.
Q: Your fund’s shares are listed and traded on the New York Stock Exchange. What is the best way to invest in those?
A: Investors can buy Fund shares as any other listed company, through a brokerage account. The ticker is MXF.
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Q: What are the benefits of investing in your shares?
A: We believe it is a good moment to invest in Mexico as some perceived risks for the Mexican market have not only been dissipated but could result in higher economic growth in years to come. The President-elect’s economic commitments of maintaining; fiscal discipline, the autonomy of the central bank and the floating exchange rate system, while having a strong mandate to fight corruption and strengthen the rule of law, have resulted in higher confidence for the private sector and consumers. In addition, the recently agreed USMCA trade deal should result in a pickup in investments as some projects were put on hold due to previous uncertainty of a trade agreement renegotiation and the Presidential election. The previous developments contrast other emerging market countries which are experiencing economic and political problems, including sharp currency depreciations, while Mexico benefits from healthier and more stable finances.
Another favorable factor is the fact that several Mexican issuers have increased their position globally, and some of them have positioned as leaders in their corresponding markets, which have resulted in an increase in revenue from sales abroad for Mexican companies.
Regarding the Fund, it has an attractive Managed Distribution Plan with quarterly cash distributions and a current dividend yield of 6.2%. Additionally, the Fund is currently trading at a discount to its Net Asset Value (NAV) of around 14%, which may generate additional returns for investors.
Lastly, the Fund has a positive short and long-term track record performance relative to its benchmark, the MSCI Mexico Index. During the last twelve months ended September 2018, it reports an outperformance of 425 basis points, while during the last ten years ended on the same date, it outperformed by 186 basis points per year.
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Q: What can we expect from The Mexico Fund in the future?
A: The Fund will keep taking advantage of the growth of selected Mexican listed companies domestically and abroad. We expect these companies to benefit from the favorable geographic and macroeconomic position of the country, and we will continue our prudent investment approach of identifying companies with strong balance sheets, positive free cash flows, strong corporate governance policies and attractive growth potentials.
The Fund´s positive outlook is highlighted by the 67% increase in its distribution payment, providing investors an attractive dividend yield, which combined with a favorable environment for the Mexican market and the Fund´s current discount to its NAV, could generate strong returns for investors.
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