BlackRock Frontiers (BRFI)

BlackRock Frontiers (BRFI) has delivered striking outperformance of a more mainstream emerging markets product over the past five years, its portfolio of stocks from the smaller emerging markets and from frontier markets delivering c. 94% in NAV terms as of 23/01/2025, while the MSCI Emerging Markets Index has delivered a disappointing 23% (see Performance).

The trust invests in a unique universe that cuts out the largest emerging markets and focusses on the opportunities in some of the fastest-growing economies in the world, economies that are almost entirely absent from the mainstream indices and funds that most investors use. These countries are typically self-help stories, being driven by internal dynamics and funding, which means their returns have a low correlation to global indices and to each other.

Over 2024, managers Sam Vecht and Emily Fletcher built up positions in some of the smaller countries in their universe, which they had had little exposure to for some time (see Portfolio). As the cyclical economic outlook in these countries had improved, with support from more orthodox monetary and fiscal policies, they saw the prospect for excellent returns from deeply discounted levels. Over 2025, BRFI benefitted from some of these positions as the thesis played out, most notably Pakistan, where a stock they bought on a P/E of 3 times made 167% in the 12 months to 30/09/2025. The deep value the managers continue to find in their universe supports a healthy Dividend yield.

BRFI’s board offers a five year liquidity opportunity, which means a 100% tender offer will be held in Q1 2026. This feature, expected to be offered every five years, at the discretion of the board, means that investors can have confidence they won’t be trapped in a vehicle on a wide discount. The Discount has narrowed as this tender draws near, as it did last time, before widening in the aftermath.