BlackRock Frontiers Investment Trust plc (LON:BRFI) has provided its latest portfolio update.
All information is at 31 August 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 | 7.4 | 5.4 | 12.4 | 15.4 | 6.6 | 105.6 |
| Net asset value | 7.4 | 6.2 | 14.7 | 25.7 | 21.5 | 132.1 |
| Benchmark (NR)** | 6.4 | 2.7 | 17.1 | 12.3 | 24.3 | 94.3 |
| MSCI Frontiers Index (NR) | 6.5 | 5.7 | -1.3 | 8.8 | 17.0 | 84.1 |
| MSCI Emerging Markets Index (NR) | 5.0 | 1.3 | -7.5 | 13.5 | 14.1 | 59.5 |
| US Dollars: | ||||||
| Share price | 2.7 | -2.7 | -5.0 | 10.2 | -3.6 | 54.1 |
| Net asset value | 2.7 | -1.9 | -3.1 | 20.1 | 9.9 | 73.7 |
| Benchmark (NR)** | 1.7 | -5.2 | -1.0 | 7.2 | 12.2 | 46.1 |
| MSCI Frontiers Index (NR) | 1.8 | -2.4 | -16.6 | 3.9 | 5.7 | 37.4 |
| MSCI Emerging Markets Index (NR) | 0.4 | -6.5 | -21.8 | 8.4 | 3.0 | 19.0 |
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: | 170.41c |
| Net asset value – cum income: | 173.77c |
| Sterling: | |
| Net asset value – capital only: | 146.45p |
| Net asset value – cum income: | 149.33p |
| Share price: | 134.25p |
| Total assets (including income): | £282.7m |
| Discount to cum-income NAV: | 10.1% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 4.0% |
| Ordinary shares in issue**: | 189,325,748 |
| Ongoing charges***: | 1.4% |
| Ongoing charges plus taxation and performance fee: | 2.4% |
*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 4.0% 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.
***Calculated as a percentage of average net assets and using expenses, excluding Performance fees and interest costs for the year ended 30 September 2021.
| Sector Analysis | Gross market value as a % of net assets | Country Analysis | Gross market value as a % of net assets | |
| Financials | 38.1 | Saudi Arabia | 23.1 | |
| Materials | 13.7 | Indonesia | 11.7 | |
| Consumer Discretionary | 10.3 | United Arab Emirates | 9.0 | |
| Industrials | 9.8 | Malaysia | 8.4 | |
| Energy | 9.5 | Kazakhstan | 7.6 | |
| Consumer Staples | 8.0 | Vietnam | 7.0 | |
| Information Technology | 4.9 | Chile | 5.9 | |
| Real Estate | 4.6 | Thailand | 5.3 | |
| Communication Services | 4.5 | Greece | 4.7 | |
| Utilities | 2.3 | Qatar | 4.3 | |
| Health Care | 1.6 | Hungary | 4.3 | |
| —– | Romania | 2.5 | ||
| 107.3 | Philippines | 2.0 | ||
| —– | Egypt | 1.9 | ||
| Short positions | -5.3 | Panama | 1.9 | |
| ===== | Poland | 1.6 | ||
| Peru | 1.5 | |||
| Kuwait | 1.5 | |||
| Colombia | 1.5 | |||
| Kenya | 1.2 | |||
| Ukraine | 0.4 | |||
| —– | ||||
| Total | 107.3 | |||
| —– | ||||
| Short positions | -5.3 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 30.09 2021 % | 31.10 2021 % | 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 % | |
| Long | 108.1 | 110.6 | 106.3 | 104.3 | 108.4 | 110.7 | 111.1 | 110.6 | 107.9 | 106.1 | 107.3 | 107.3 |
| Short | 0.4 | 0.4 | 0.4 | 1.0 | 1.9 | 3.3 | 2.3 | 1.8 | 4.7 | 4.6 | 6.2 | 5.3 |
| Gross | 108.5 | 111.0 | 106.7 | 105.3 | 110.3 | 114.0 | 113.4 | 112.4 | 112.6 | 110.7 | 113.5 | 112.6 |
| Net | 107.7 | 110.2 | 105.9 | 103.3 | 106.5 | 107.4 | 108.8 | 108.8 | 103.2 | 101.5 | 101.1 | 102.0 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Saudi National Bank | Saudi Arabia | 4.7 |
| Emaar Properties | United Arab Emirates | 4.6 |
| Bank Rakyat | Indonesia | 4.2 |
| JSC Kaspi | Kazakhstan | 3.3 |
| Abdullah Al Othaim Markets | Saudi Arabia | 3.1 |
| Genting Malaysia | Malaysia | 3.0 |
| Saudi Telecom | Saudi Arabia | 3.0 |
| Qatar Gas Transport | Qatar | 2.9 |
| Saudi British Bank | Saudi Arabia | 2.8 |
| FPT | Vietnam | 2.6 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:
The Company’s NAV returned 2.7% versus its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which rose by 1.7% in August. For reference, the MSCI Emerging Markets Index ended the month up 0.4% and the MSCI Frontier Markets Index returned 1.8% over the same period (all performance figures are on a US Dollar basis with net income reinvested).
Market sentiment in August was dominated by speculation around a Federal Reserve (‘Fed’) pivot at Jackson Hole which eventually culminated into a strong reiteration of their hawkish stance. Markets globally remained concerned about a global growth shock. Frontier markets have fared better as they did not show the same fiscal largesse as many developed economies and several central banks have been disciplined about raising rates.
Kazakhstan (+13%) was the top performing country this month, largely driven by stock specifics. The market has started to recover from the lows it experienced in the aftermath of the Russia and Ukraine conflict and concerns of contagion. Indonesia also had a good month (+5%) as the country continued to show strong economic recovery. Indonesia has benefited from a very strong trade balance this year as exports have been supported by high coal and palm oil prices, which have supported the currency. On the other side, eastern Europe has lagged. Poland (-13%) was the worst performer. The European energy crisis has driven a significant increase in Poland’s energy import bills, and created fears around the potential economic impact of a substantial European recession. Colombia (-6%) also finished August in the red on concerns of a strong shift to the left in government agenda post elections.
The Company benefited from its exposure to the United Arab Emirates. Emaar Properties (+14%) was the top contributor, rising on the back of the very strong demand trends for Dubai real estate that we have seen this year. Kazakh fintech platform Kaspi (+17%) also rallied on the announcement of strong results, abating market concerns on the disruption earlier in the year. Saudi tech services company ELM (+17%) reported a strong earnings release, benefiting from an increase in government digitization spend. On the other side, Saudi gym operator Leejam Sports (-24%) was the top detractor as the company has struggled to grow membership as much as expected.
We made few changes to the portfolio in August. We added to our exposure in Indonesia after the central bank delivered an unexpected 25bps rate hike. We believe it sends the right signal to the market amidst an environment of rising inflation. We increased our holding in Peruvian bank Credicorp, where we think net interest margins can continue to improve. We initiated a position in Kuwaiti wireless telecom giant Mobile Telecommunication, a company where we think the strong free cash flow generation is insufficiently recognized.
We reduced exposure to Saudi Arabia, a market that has shown very strong performance year to date, rising 11%. We have also reduced our holding in Emaar Properties to book profits.
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 many 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 August 2022
2MSCI as at 31 August 2022
16 September 2022
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
