Latin America has a strong growth story, but some buy-side firms are not persuaded.

When the emerging markets are hot, the developed markets are not. A growing middle class has brought a sense of wealth to Latin American investors, and strengthening economies have brought good fortune on many Latin American entrepreneurs to build businesses. Resource-rich Brazil remains the market leader in terms of investment choices, but Chile, Columbia, Mexico are not far behind for many investors.

Like with many market trends, they can become overheated. Alternatively, the risks they pose just might not be what fearful investors are looking for in today’s volatile markets.

“Typically, we don’t want to have more than 20% of our portfolio in the emerging markets. If we do, we primarily focus on the developed emerging market areas, such as China and South Africa,” said Paul Hechmer, chief investment officer at del Rey Global Investors, a California based asset manager with more than $1.6 billion under management. The firm’s South African exposure primarily includes mining stocks.

Hechmer’s objective has always been to outperform the MSCI EAFE Index over both short- and long-term periods. His victories have landed del Rey a spot on the sub-advisor platform at Canada’s CIBC Asset Management. Del Rey currently managed the large-cap value component of the Frontiers International Equity Pool, a wholly owned subsidiary of CIBC.

“It was just a decision from the get-go that the portfolio wasn’t going to have much exposure to South America as our clients wanted more exposure to the traditional emerging markets as they wanted us to develop a strong core focus on regions with strong franchises,” Hechmer continued.

Latin American equities are largely “a proxy trade on China,” according to Hechmer, who also told Markets Media that the firm’s South African mining holdings can provide the same exposure to the resource rich companies of Latin America. Latin America may be most attractive for its large stronghold on telecom companies, but those are “not attractive from a valuation standpoint.”

“A dedicated EM manager who can buy, with a broader investment mandate, ten smaller LatAm companies wouldn’t face the same issue as we do as we’re focused on large brands. But, from a practical standpoint del Rey buying LatAm is really just us buying a mining company or a Chinese company,” Hechmer said.

Del Rey’s two main products are its Monarch Fund, focused on generating capital appreciation by finding undervalued, non-U.S. long-only opportunities, and its International Equity Strategy, which focuses on non-U.S. large cap investments. The latter is up 5% as of the fourth quarter of 2011.