Fund Profile

BlackRock Frontiers 10 June 2019

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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Frontiers. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

BlackRock Frontiers Investment Trust (BRFI) invests in the world’s least developed markets in pursuit of capital growth, offering a portfolio exposed to fast-growing economies with stock markets with low correlations to each other and to the other major markets.

Porfolio managers Sam Vecht and Emily Fletcher apply a combination of top-down macro-economic analysis and bottom-up fundamental stock analysis to build their portfolio, and they estimate that over the long -term around 50% of the alpha they have generated has come from each.

The managers gain access to these markets either through direct equity investment or via contracts for difference (CFDs), which allows them to gear up the trust and provides far greater flexibility, at a lower cost than traditional bank borrowings. Additionally, the mandate allows them to short stocks through CFDs . Over the past year, the portfolio’s average long exposure has been 111%, with short exposure of 6%, giving a gross exposure of 117%, and average net exposure of 105%.

BRFI has handsomely outperformed the MSCI Frontier Markets Index over the long run. However, relative performance over the past year has been more disappointing, predominately as a result of a larger position relative to the index in Argentina, and the unfortunate timing of the change of benchmark back in April 2018.

The trust now invests in the emerging and frontier markets universe, minus the eight largest countries in the emerging markets index, which usually dominate the majority of emerging market portfolios. The MSCI Frontier Markets Index has been jettisoned as being too concentrated and suffering too many changes of composition as countries were regularly promoted in and out of the Index which led to trading activity for reasons other than the attractiveness of stocks. The new index is more diversified and should be more stable in composition in the future.

BRFI offers a healthy yield of 4.2%, despite income not being an explicit objective of the managers. This is thanks to the growing earnings on underlying companies, and we would note that the trust has revenue reserves worth 45% of last year’s full dividend. The current yield is also higher than all but one of the emerging markets trusts in the sector and all but one of the global equity income trusts.

This trust is one of few options available in the open or closed-ended space that enables investors to access frontier markets, and this, plus the strong long-term performance, may explain why it has tended to trade on a premium in recent years – now at 2.5% (as at end April 2019), compared to the 7.4% discount of for the average emerging markets trust.

Kepler View

We wish we could say that the trust was now cheap after a disappointing year of performance in 2018, but investors are (quite rightly in our view) keeping the faith: the premium has rebounded back towards 2% in 2019 as relative performance has improved.

The trust remains a leading product for accessing frontier markets, and its long-term track record justifies the rating and the relatively high charges, in our view.

We also think the new composition of the universe is much more rational from an investors’ point of view, and we would note that the increasing weighting that will be given to Chinese A-Shares in the coming years by MSCI means that mainstream emerging markets funds will increasingly become “China plus” funds, in the way global funds are often “US plus”. Portfolios like this offer an important way to balance such a bias and obtain access to fast growing economies which are less correlated to the global economic cycle.

BULL
BEAR
BlackRock has extensive resources deployed to these inefficient markets
Frontier markets may suffer during the next cyclical slowdown - as they did in 2008
The managers have a strong track record of alpha generation over the long run
The trust is not cheap, although it is the leader in its field
The yield is comparable to an equity income product
Managers can go long and short stocks, which means gross gearing can be relatively high at times


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2024 Kepler Growth Rated Fund

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Fund History

08 Nov 2024 Monthly roundup: the budget’s impact, DGN's strategic review and our podcasts & results highlights
Jo and Ryan discuss the latest news, reviews and interviews in the investment trust world...
25 Oct 2024 Why frontier markets have such a big role to play in global trends
Global changes and supply chain tensions; could smaller markets see growth?
27 Sep 2024 Can investing in frontier markets enhance your portfolio?
Emerging markets are a rich source of potential investment opportunities, but investors may be neglecting some of their most attractive sources of growth. Funds often focus principally on the largest markets – China, India or Taiwan. Looking into the world’s smallest markets – the frontier economies - brings something new and truly different to a portfolio, we believe...
06 Aug 2024 Flash update: BlackRock Frontiers
BRFI’s unique investment universe has the wind in its sails…
07 Jun 2024 BlackRock Frontiers Investment Trust: A Look Ahead for 2024
As developed markets see higher interest rates feeding through into the real economy, activity is likely to slow. But there are stronger prospects for investment growth in many emerging markets, particularly those outside China. Monetary tightening is already underway in Latin America and Eastern Europe, with inflationary pressures substantially controlled. This should support domestic economic growth and may suggest a better outlook for the next 12 months...
13 Mar 2024 What's next for BlackRock Frontiers – Podcast: Trust Issues #27
We talk to KTI Research Manager Thomas McMahon about BRFI's performance, diversification benefits, friendshoring, and more...
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
27 Dec 2023 Man in the mirror
Our analysts take a deep dive into their own output and dig out their favourite pieces of the year…
04 Dec 2023 Results analysis: BlackRock Frontiers
BRFI’s portfolio is delivering strong growth at a time the global economy looks weak…
01 Nov 2023 BlackRock Frontiers
Emily Fletcher and Sudaif Niaz
Rewatch this webinar which was part of our October and November online event 'The Best of BlackRock'...
Watch Recording
20 Sep 2023 Five questions about emerging markets
We track key developments in the diverse emerging markets universe…
24 Aug 2023 Fund Analysis
BRFI has been on a multi-year run of outperformance of the mainstream EM indices…
05 Jul 2023 Silk Road Strife
The Asian narrative has been dominated by the India vs China debate, but on which side of the line have investment trust managers fallen?
28 Apr 2023 The outlook for the world’s smallest markets
Frontier markets have navigated some significant headwinds in 2022, but the outlook for the year ahead looks brighter, says Emily Fletcher, manager of the BlackRock Frontiers Investment Trust...
21 Dec 2022 Reasons to be cheerful
We find reasons to be cheery this Christmas in the long-term trends which are going to transform society and generate returns…
21 Dec 2022 Fund Analysis
BRFI’s unique investment proposition has outperformed mainstream emerging market funds for two years running…
15 Dec 2022 Beyond the Rubicon
Our first live event since March 2020 saw three fund managers describing their different perspectives on a vastly-changed investment landscape…
14 Dec 2022 Results analysis: BlackRock Frontiers
BRFI has significantly outperformed the key emerging market indices in 2021 and 2022…
07 Dec 2022 Live sessions today - Live from London
Forgot to register for our Live from London event? Here are the details of today’s line-up of investment companies. Join us with an easy-access link to the presentations...
14 Oct 2022 Frontier markets at a time of high inflation
Frontier markets might appear vulnerable at a time of global economic tension. The reality is that some are thriving in spite of the difficult environment, says Emily Fletcher, Co-Manager of the BlackRock Frontiers Investment Trust plc...
15 Sep 2022 Same same but different
We discuss the case for emerging markets at different stages of development…
19 Jul 2022 Fund Analysis
As major economies stumble, the world’s smallest markets may offer overlooked opportunities…
29 Apr 2022 Stock picking in the forgotten 40
The world’s smallest markets are widely neglected by investors. Emily Fletcher, Co-Manager of the BlackRock Frontiers Investment Trust plc, asks whether a change of market environment might bring about a new era for these unloved gems...
22 Dec 2021 No humbug
Our analysts look back at a year of predictions, theories and ideas, and highlight those they think could matter most…
07 Dec 2021 Results analysis: BlackRock Frontiers
BRFI has delivered outstanding returns in the last financial year, combining strong capital returns and an attractive fully covered dividend…
10 Nov 2021 Fantastic growth funds (and where to find them)
We found them in India, Japan, frontier markets, healthcare and the global sector – and here they are…
10 Nov 2021 Fund Analysis
Opportunities in smaller emerging and frontier countries bring BRFI to the fore after China woes…
10 Nov 2021 Slides and Audio: BlackRock Frontiers
Download the presentation and listen to the audio from our 'Fantastic growth funds (and where to find them)' conference on 4 November...
01 Sep 2021 Winter is coming
Summer was a welcome opportunity for exhausted investors to turn their backs on the legion threats they face, but they haven't gone away and the days grow short - we examine four in detail...
25 Aug 2021 Is the UK’s debt a ticking time bomb?
Our analyst argues Rishi is right to worry about government debt and borrowing…
16 Jun 2021 Fund Analysis
BRFI still looks cheap despite good gains in the recovery…
16 Feb 2021 The Last Frontier: finding growth in smaller emerging markets
Smaller emerging markets have been left behind as investors have focused on a handful of high growth areas. As the crisis fades, investors are already starting to recognise that these areas may provide high growth at compelling valuations.
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
18 Dec 2020 Results analysis: BlackRock Frontiers
BlackRock Frontiers has seen a dramatic improvement in performance since its year end, and the managers are excited about the outlook…
09 Dec 2020 A bumper harvest?
Agricultural and industrial commodities have rallied strongly, but what are the implications for emerging market allocations...?
02 Dec 2020 Fund Analysis
BRFI’s portfolio is trading on a record low valuation, putting it in a potentially strong position for a COVID bounce…
11 Nov 2020 Now that's what I call a discount!
Presentations and audio from our conference focussed on discount opportunities in the investment trust sector…
11 Nov 2020 Slides and Audio: BlackRock Frontiers
View the presentation and listen to the audio from our 'Discounts in Focus' event on 05 November...
22 Oct 2020 Spotlight on discounts
As our event focussed on discounts approaches, we update our portfolio of discount opportunities and review discounts across the wider IT universe…
07 Oct 2020 Emerging markets: beyond China
Investors’ focus has been directed towards China as its weight in global indices grows, however, this may see them miss out on the growth, income, and diversification opportunities elsewhere...
21 Aug 2020 Fund Analysis
BRFI’s portfolio is trading on a record low valuation…
18 Jun 2020 Gimme shelter
As income investors brace for impact we ask which regions and trusts are less likely to cut their dividends in 2020…
09 Jun 2020 Fortune favours the brave
Better yields and discounts are on offer in the emerging markets…
16 Jan 2020 Drifting apart: how emerging markets have become less correlated
We examine how correlations between different emerging markets have evolved, and whether single country strategies could diversify returns going forward....
30 Dec 2019 Fund Analysis
BRFI offers a strikingly high yield from undervalued regions with strong growth potential…
21 Aug 2019 Exploring the next frontier
The world’s developing markets may look and feel like large emerging markets, but they bring something new for investors. The team at BlackRock explain why…
03 Jul 2019 Push-me pull-you
Two contrasting influences are dominating the outlook for Asian markets - we analyse them and how Asia trusts are positioning their portfolios in response...
13 Jun 2019 Real growth in a world of fake news
Presentations and audio from our event at the London Stock Exchange, where six fund managers set out their stall for an exciting future...
10 Jun 2019 Fund Analysis
Sam Vecht's flagship emerging markets fund has kept pace with its new, more appropriate, benchmark so far in 2019 after a tricky start last year...
14 Nov 2018 Fund Analysis
BlackRock Frontiers is the leading fund for investors seeking exposure to the high development potential in frontier markets...
14 May 2018 Fund Analysis
Long-term capital growth from investment in companies operating in frontier markets...
19 Dec 2017 Fund Analysis
A high-quality trust managed by an experienced and well-resourced team that offers exposure to lowly correlated frontier markets
30 Nov 2017 Race ready
Our analysis suggests conditions are right for emerging markets fund managers who can add real alpha to generate strong returns...
29 Jun 2017 Fund Analysis
21 May 2017 Brave new world
We ask the top managers in each sector, region and asset class where they see the opportunities in the months ahead...
12 Oct 2016 Fishing for discounts
Despite a resurgence among emerging market equities, discounts continue to yawn among trusts in the sector – we highlight three that stand out...
11 Oct 2016 Fund Analysis
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