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 the smaller emerging markets and frontier markets, which the managers note are generally under-owned by most mainstream emerging markets funds but offer potentially exciting GDP growth rates and development pathways.

As a result of the pandemic, many of these countries stock markets trade on low valuations. As we discuss in the Performance section, the strong performance of BRFI’s portfolio in recent weeks indicates it may be highly sensitive to an economic recovery, potentially now in sight given positive results from various vaccine trials.

Managers Sam Vecht and Emily Fletcher believe their portfolio contains a number of exciting companies which can benefit from the secular growth trends of companies at early stages of development, typically from endogenous growth rather than imported global growth.

In a difficult period for global markets and BRFI in particular, a discount of 4.1% has opened up. We note that when the world economy was in better shape it was common for BRFI to trade on a premium. There will be an exit opportunity for investors in the next financial year too, with the details to be confirmed, which should reduce further downside risk to the discount.

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 5.8%. As we discuss in the Dividend section, we think it likely the dividend will be rebased to lower levels in the coming weeks when the annual report and accounts are published and the final dividend declared.

Analyst's View

BRFI could be about to embark upon an exciting period of growth in our opinion. Valuations are very low, which we believe should reduce the downside risk in any temporary setbacks. Meanwhile the portfolio has leapt sharply on the positive, reflationary news of recent weeks. BRFI’s underlying markets have arguably suffered from a flight to safety and liquidity, and little technology and ecommerce representation in their stock markets. However, with GDP growth in its key markets expected by the IMF to be high next year (>7%) , the capital we would expect to see chasing cheap assets in a recovery could partly be allocated to these markets.

A weaker dollar environment, which is possible especially if a Biden administration manages to implement a large fiscal stimulus, could also benefit BRFI’s universe. We think the rise in the net exposure in recent months and elimination of the short book shows how positive the managers are on the current opportunity.

The discount that opened up this year has since partly closed. We find this unsurprising given the potential we have highlighted above and the tender offer which is likely to be made at the next AGM. This should offer an exit close to NAV in whole or in part, so further limits the downside risks at the share price level.

bull bear
BRFI offers excellent diversification through access to rarely held markets
A relapse in the pandemic could hit sentiment once more
The valuation of the portfolio has reached extreme lows
The OCF is not cheap, although the trust is the leader in its field
Most of the countries in BRFI’s universe have suffered a lower medical and economic toll from the pandemic than the rest of the world Managers can go long and short stocks with CFDs, which means effective gearing can be high at times
Continue to Portfolio

Fund History

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…
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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