BlackRock Frontiers Investment Trust plc (LON:BRFI) has provided its latest portfolio update.
All information is at 31 October 2022 and unaudited.
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
Performance at month end with net income reinvested.
| One month % | Three months % | One year % | Three years % | Five years % | Since Launch* % | |
| Sterling: | ||||||
| Share price | -0.8 | 1.4 | 2.8 | 13.7 | 0.3 | 94.1 |
| Net asset value | -0.4 | 2.7 | 4.3 | 24.8 | 17.7 | 121.8 |
| Benchmark (NR)** | 0.1 | 2.8 | 10.2 | 15.5 | 19.9 | 87.8 |
| MSCI Frontiers Index (NR) | -7.2 | -6.6 | -18.1 | 2.6 | 2.4 | 61.6 |
| MSCI Emerging Markets Index (NR) | -6.1 | -9.2 | -17.9 | -1.9 | -1.4 | 37.8 |
| US Dollars: | ||||||
| Share price | 2.3 | -4.1 | -13.7 | 1.1 | -12.9 | 43.9 |
| Net asset value | 2.8 | -2.9 | -12.4 | 11.1 | 2.1 | 64.2 |
| Benchmark (NR)** | 3.3 | -2.7 | -7.4 | 2.7 | 3.9 | 39.7 |
| MSCI Frontiers Index (NR) | -4.3 | -11.6 | -31.2 | -8.7 | -11.2 | 19.3 |
| MSCI Emerging Markets Index (NR) | -3.1 | -14.1 | -31.0 | -12.7 | -14.5 | 1.8 |
Sources: BlackRock and Standard & Poor’s Micropal
* 17 December 2010.
** The Company’s benchmark changed from MSCI Frontier Markets Index to MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (net total return, USD) effective 1/4/2018.
| At month end | |
| US Dollar | |
| Net asset value – capital only: | 160.12c |
| Net asset value – cum income: | 164.28c |
| Sterling: | |
| Net asset value – capital only: | 139.06p |
| Net asset value – cum income: | 142.68p |
| Share price: | 126.75p |
| Total assets (including income): | £270.1m |
| Discount to cum-income NAV: | 11.2% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 4.2% |
| Ordinary shares in issue**: | 189,325,748 |
| Ongoing charges***: | 1.4% |
| Ongoing charges plus taxation and performance fee****: | 1.4% |
*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 4.2% and includes the 2021 final dividend of 4.25 cents per share, declared on 1 December 2021, and paid to shareholders on 11 February 2022. Also included is the 2022 interim dividend of 2.75 cents per share, declared on 26 May 2022, and paid to shareholders on 24 June 2022.
** Excluding 52,497,053 ordinary shares held in treasury.
***The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding performance fees, finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for Year ended 30 September 2022.
**** The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses and including performance fees but excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for Year ended 30 September 2022.
| Sector Analysis | Gross market value as a % of net assets | Country Analysis | Gross market value as a % of net assets | |
| Financials | 42.1 | Saudi Arabia | 23.5 | |
| Energy | 10.9 | Indonesia | 13.8 | |
| Consumer Discretionary | 9.9 | Malaysia | 7.9 | |
| Materials | 9.3 | Kazakhstan | 7.4 | |
| Industrials | 9.0 | United Arab Emirates | 6.7 | |
| Consumer Staples | 8.0 | Thailand | 6.2 | |
| Communication Services | 5.8 | Vietnam | 5.7 | |
| Real Estate | 4.7 | Greece | 4.7 | |
| Information Technology | 4.6 | Hungary | 4.6 | |
| Health Care | 1.6 | Qatar | 4.5 | |
| Utilities | 1.5 | Poland | 3.7 | |
| —– | Chile | 3.6 | ||
| 107.4 | Romania | 2.2 | ||
| —– | Panama | 2.1 | ||
| Short positions | -5.3 | Philippines | 1.9 | |
| ===== | Peru | 1.8 | ||
| Kuwait | 1.5 | |||
| Colombia | 1.5 | |||
| Argentina | 1.4 | |||
| Egypt | 1.4 | |||
| Kenya | 0.9 | |||
| Ukraine | 0.4 | |||
| —– | ||||
| Total | 107.4 | |||
| —– | ||||
| Short positions | -5.3 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 30.11 2021 % | 31.12 2021 % | 31.01 2022 % | 28.02 2022 % | 31.03 2022 % | 30.04 2022 % | 31.05 2022 % | 30.06 2022 % | 31.07 2022 % | 31.08 2022 % | 30.09 2022 % | 31.10 2022 % | |
| Long | 106.3 | 104.3 | 108.4 | 110.7 | 111.1 | 110.6 | 107.9 | 106.1 | 107.3 | 107.3 | 106.2 | 107.4 |
| Short | 0.4 | 1.0 | 1.9 | 3.3 | 2.3 | 1.8 | 4.7 | 4.6 | 6.2 | 5.3 | 5.2 | 5.3 |
| Gross | 106.7 | 105.3 | 110.3 | 114.0 | 113.4 | 112.4 | 112.6 | 110.7 | 113.5 | 112.6 | 111.4 | 112.7 |
| Net | 105.9 | 103.3 | 106.5 | 107.4 | 108.8 | 108.8 | 103.2 | 101.5 | 101.1 | 102.0 | 101.0 | 102.1 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Bank Rakyat | Indonesia | 5.0 |
| Emaar Properties | United Arab Emirates | 4.7 |
| Saudi National Bank | Saudi Arabia | 4.2 |
| PKO Bank Polski | Poland | 3.7 |
| JSC Kaspi | Kazakhstan | 3.4 |
| Qatar Gas Transport | Qatar | 3.1 |
| Saudi Telecom | Saudi Arabia | 3.1 |
| Astra International | Indonesia | 3.0 |
| Abdullah Al Othaim Markets | Saudi Arabia | 2.9 |
| Saudi British Bank | Saudi Arabia | 2.9 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:
The Company’s NAV returned +2.8% versus its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which was up by 3.3% in October. For reference, the MSCI Emerging Markets Index ended the month down by 3.1% and the MSCI Frontier Markets Index fell by 4.1% over the same period (all performance figures are on a US Dollar basis with net income reinvested).
Eastern Europe was the strongest performing region this month with Turkey (+23%), followed by Poland (+16%), Hungary (+15%) and Greece (+14%). These markets performed strongly as European gas prices rolled over from storage capacity filling up and also the European winter was off to an unusually warm start. Elsewhere, the Middle East performed positive as oil exporters UAE (+4%) and Saudi Arabia (+3%) were buoyed by oil price surge following OPEC+’s production cuts. On other end, Vietnam (-14%), was one of the worst performing markets driven by the government’s crackdown on the property financing market.
The Company benefited from its exposure to Eastern Europe. Polish bank PKO (+24%) did well as net interest margins and loan growth continued to tick up. The news flow on regulatory measures also seems to have peaked in Poland. National Bank of Greece (+22%) was another strong contributor, benefitting from better macro prospects and repricing from interest rates. Greek renewable power utility Terna (+15%) rallied on rumours of a buyout by Australian investment group First Sentier. Outside of Eastern Europe. Kaspi (+13%), a fintech super-app in Kazakhstan posted strong earnings results across all three verticals: payments, marketplace and banking. Meanwhile, the Company’s exposure to Vietnam was the key detractor, with both Vietnam Technological and Commercial Bank (-28%) and IT services operator FPT Corp (-10%) selling off with the broader Vietnamese equity market. Saudi grocery store operator Abdullah Al Othaim (-8%) reversed some of its recent gains.
We made a few changes to the portfolio in October. We added to our Indonesian holdings, Bank Rakyat and conglomerate Astra International. The medium-term prospects for Indonesia look promising; prior concerns about monetary policy were appeased by recent central bank hikes, and Indonesia is evolving from a primarily upstream extractive economy into a more value additive one given government incentives to process abundant natural resources for export. We also added to oil and gas refiner MOL in Hungary which trades on an attractive valuation. More generally, with the Hungarian central bank raising rates to 18% in mid-October, the country looks well positioned for global carry investors. We initiated a position in energy company Vista, which owns assets in the famous Vaca Muerta shale formation in Argentina. The company should benefit from higher hydrocarbon prices and an increase in export volumes. We reduced positions in Indocement, a cement producer in Indonesia, as the post-COVID rebound in volumes has disappointed. We also booked profits in Chilean lithium producer Albemarle.
We see marked contrast in the monetary and fiscal policy decisions that have been taken in small emerging/frontier and developed markets during 2022 and find significant value in currencies and equity markets across these smaller countries. We are optimistic over the long-term in our under-researched investment universe which should allow for compelling alpha opportunities.
Sources:
1BlackRock as at 31 October 2022
2MSCI as at 31 October 2022
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
