The Mexican Stock Exchange (BMV) is a concentrated market, as the 10 largest companies by market capitalization represent approximately 60% of the total market capitalization.
According to The Mexico Fund, the value of the BMV may be subject to greater volatility than less concentrated markets.
The Mexico Fund is a non-diversified, closed-ended investment company with the investment objective of long-term capital appreciation through investments in securities, primarily shares, listed on the BMV.
Thus, the Fund provides a vehicle for investors who wish to invest in Mexican companies through a non-diversified managed portfolio as part of their overall investment program.
As a result, the Fund has adopted a concentration policy that allows it to concentrate its investments in any industry or group of industries of the BMV Index if, at the time of investment, said industry represents 20% or more of the Index.
However, the foregoing may occur provided the Fund does not exceed the concentration of the Index by more than 5 per cent.
Because the Fund’s investments may be concentrated from time to time in certain industries, the Fund’s value may be subject to greater volatility than a fund with a less concentrated portfolio.
To achieve its investment objective, the Fund will generally invest at least 80% of its total assets in equity securities listed on the BMV but may reduce its holdings in equity securities listed on the BMV below 80% of its total assets for temporary defensive purposes when unusual market or economic conditions occur.
This investment policy is a non-fundamental policy, which may be modified by the Board of Directors by giving shareholders 60 days prior written notice.
Likewise, the Fund may invest up to 20% of its assets in issuers that are listed on the Mexican Stock Exchanges, but that are incorporated outside of Mexico, provided that each issuer has a subsidiary incorporated in Mexico.
The Mexico Fund indicated that a certain person has a majority interest in companies that represent approximately 19.6% of the market capitalization of the BMV.
As of October 31, 2021, the Fund had investments representing 16.5% of its net assets in two of these companies (América Móvil and Telesites).