Fund Profile

Disclaimer

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 smaller emerging markets and frontier markets, aiming to use a mixture of top-down and bottom-up analysis to find companies which can benefit from their superior GDP-growth rates.

The pandemic’s impact on sentiment towards BRFI’s universe has been dramatic, resulting in its portfolio now trading on a record low historical P/E of just seven times (compared to over 13 times for the MSCI Emerging Markets Index).

Managers Sam Vecht and Emily Fletcher believe there are now pockets of real value in their universe, even in such a fluid and macro-sensitive environment. They believe higher growth and higher interest rates found in many of their countries should attract foreign capital in coming years, as investors hunt abroad for returns and yield. Additionally, lower levels of external debt have provided some resilience, while cheap currencies should improve trade competitiveness, paving the way for a rebound.

BRFI does not target a specific dividend, but thanks to organic earnings growth from the portfolio, the shares are trading on a historical yield of 5.6%. As we discuss in the Dividend section, the companies the managers target are cash-generative and prioritise maintaining their dividends. However, these markets haven’t fully escaped recent dividend-cut trends. The board has made a modest cut to the interim for 2020, and a cut to BRFI’s full-year dividend is also possible.

BRFI has fallen to a 7% discount. While this is narrower than the 12% average for the AIC Global Emerging Markets sector, it is wider than recent history. Indeed, BRFI has traded on a premium for much of the past three years.

Analyst's View

We think some smaller economies exhibit a level of flexibility and adaptability that could allow them to recover faster from the impact of COVID-19. Whatever the reasons, it seems that the developed world will come out of this crisis with much weaker economies, higher levels of debt and lower levels of growth. By contrast, frontier countries have taken less drastic action, meaning public and corporate finances are in a relatively strong state. Cheaper currencies and lower external-debt levels, along with the long-term positives of good demographics and high GDP growth create a potentially potent mixture in any recovery.

It looks to us that this could be a cyclical bottom for BRFI. The portfolio valuation is at record lows, on a trailing P/E almost half that of the MSCI Emerging Markets Index. Meanwhile the underlying economies seem ready to recover from the impact of the pandemic. On top of this, the wide discount relative to history adds to the attractions. In our view this could be an interesting entry point to a trust which offers access to countries which have been largely left behind in the stampede into China and into information technology.

bull bear
BRFI offers excellent diversification through access to rarely held markets Frontier markets can suffer during global slowdowns, as they did in 2008 and more latterly in 2020
The valuation of the portfolio has reached extreme lows The OCF is not cheap, although the trust is the leader in its field
Although dividend cuts are possible, the yield is comparable to an equity-income fund, and dividend prospects are potentially better than in the UK Managers can go long and short stocks with CFDs, which means effective gearing can be high at times
Continue to Portfolio

Fund History

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…
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...
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...
17 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
28 Jun 2017 Fund Analysis
A growth focused trust which invests in some of the world's most exotic markets, managed by a highly experienced team...
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