BlackRock Frontiers Investment Trust plc (LON:BRFI) has provided its latest portfolio update.
All information is at 31 December 2021 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 | 1.3 | 7.6 | 12.9 | 10.7 | 24.7 | 93.6 |
| Net asset value | 0.2 | 1.9 | 19.2 | 20.7 | 30.3 | 110.7 |
| Benchmark (NR)** | 0.6 | 0.9 | 11.9 | 5.0 | 26.8 | 68.9 |
| MSCI Frontiers Index (NR) | -0.9 | 0.3 | 20.8 | 34.7 | 44.1 | 93.2 |
| MSCI Emerging Markets Index (NR) | -0.5 | -1.8 | -1.6 | 28.4 | 46.1 | 66.0 |
| US Dollars: | ||||||
| Share price | 3.8 | 8.0 | 11.9 | 17.8 | 36.9 | 68.9 |
| Net asset value | 2.6 | 2.3 | 18.2 | 28.5 | 43.0 | 83.5 |
| Benchmark (NR)** | 3.0 | 1.3 | 10.9 | 11.7 | 39.0 | 47.9 |
| MSCI Frontiers Index (NR) | 1.5 | 0.7 | 19.7 | 43.3 | 57.9 | 67.9 |
| MSCI Emerging Markets Index (NR) | 1.9 | -1.3 | -2.5 | 36.6 | 60.1 | 44.2 |
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: | 185.79c |
| Net asset value – cum income: | 190.69c |
| Sterling: | |
| Net asset value – capital only: | 137.17p |
| Net asset value – cum income: | 140.79p |
| Share price: | 131.75p |
| Total assets (including income): | £266.5m |
| Discount to cum-income NAV: | 6.4% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 3.2% |
| 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 3.2% and includes the 2021 interim dividend of 2.75 cents per share, announced on 01 June 2021 and paid to shareholders on 25 June 2021. Also included is the 2021 final dividend of 4.25 cents per share, declared on 1 December 2021, with pay date 11 February 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 | 37.8 | Saudi Arabia | 17.1 | |
| Consumer Discretionary | 17.7 | Indonesia | 12.8 | |
| Industrials | 15.9 | Vietnam | 8.5 | |
| Materials | 8.2 | Thailand | 7.8 | |
| Consumer Staples | 6.1 | Greece | 7.0 | |
| Information Technology | 4.8 | United Arab Emirates | 6.5 | |
| Real Estate | 4.2 | Egypt | 5.7 | |
| Health Care | 4.0 | Malaysia | 5.4 | |
| Energy | 2.8 | Kazakhstan | 5.4 | |
| Utilities | 1.5 | Philippines | 5.0 | |
| Communication Services | 1.3 | Poland | 4.2 | |
| —– | Chile | 4.0 | ||
| 104.3 | Qatar | 2.9 | ||
| —– | Hungary | 2.6 | ||
| Short positions | -1.0 | Kenya | 2.2 | |
| ===== | Peru | 2.1 | ||
| Romania | 1.8 | |||
| Panama | 1.5 | |||
| Pakistan | 1.4 | |||
| Nigeria | 0.4 | |||
| —– | ||||
| Total | 104.3 | |||
| —– | ||||
| Short positions | -1.0 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 31.01 2021 % | 28.02 2021 % | 31.03 2021 % | 30.04 2021 % | 31.05 2021 % | 30.06 2021 % | 31.07 2021 % | 31.08 2021 % | 30.09 2021 % | 31.10 2021 % | 30.11 2021 % | 31.12 2021 % | |
| Long | 110.5 | 114.0 | 105.7 | 108.5 | 105.3 | 106.8 | 107.1 | 104.2 | 108.1 | 110.6 | 106.3 | 104.3 |
| Short | 1.1 | 4.5 | 3.4 | 2.5 | 2.3 | 4.6 | 2.3 | 0.6 | 0.4 | 0.4 | 0.4 | 1.0 |
| Gross | 111.6 | 118.5 | 109.1 | 111.0 | 107.6 | 111.4 | 109.4 | 104.8 | 108.5 | 111.0 | 106.7 | 105.3 |
| Net | 109.4 | 109.5 | 102.3 | 106.0 | 103.0 | 102.2 | 104.8 | 103.6 | 107.7 | 110.2 | 105.9 | 103.3 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Saudi National Bank | Saudi Arabia | 4.9 |
| Bank Rakyat | Indonesia | 4.0 |
| Mobile World | Vietnam | 3.4 |
| Saudi British Bank | Saudi Arabia | 3.2 |
| Emaar Properties | United Arab Emirates | 3.2 |
| FPT | Vietnam | 3.1 |
| United International Transport | Saudi Arabia | 2.9 |
| LPP | Poland | 2.8 |
| JSC Kaspi | Kazakhstan | 2.8 |
| Indocement Tunggal Prakarsa | Indonesia | 2.7 |
Commenting on the markets, Sam Vecht and Emily Fletcher, representing the Investment Manager noted:
The Company’s NAV returned +2.6% versus its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”), which returned +3.0% in December. For reference, the MSCI Emerging Markets Index ended the month +1.9% and the MSCI Frontier Markets Index +1.5% over the same period. For the full calendar year 2021, the Company’s NAV returned +18.2%, significantly outperforming its benchmark index which was up 10.9%. For reference, the MSCI Emerging Markets Index finished 2021 down 2.5%, while MSCI Frontier Markets Index returned +19.7% (all performance figures are on a US Dollar basis with net income reinvested).
Our stock selection in Poland was the largest contributor to returns over the month driven by Polish retailer, LPP (+32%) which has benefited from consumer recovery in Central and Eastern Europe and delivered strong earnings results. Our position in Indonesian cement producer, Indocement (+15%), contributed positively, as the correction in coal price and reopening outlook benefited the company. The position in National Bank of Greece (+12%) also did well as the company reported better than expected results, showing very low levels of loan quality deterioration post Covid-19.
On the other side, Kazakh e-commerce and fintech platform, Kaspi (-10%), gave back some performance after a strong year. Post month end, Kazakhstan has seen significant violent protests following fuel price hikes. As of January 10th, Kazakh security forces have restored calm in Almaty, with some backing from Russian troops and stock prices have bounced off their lows.
Philippines casino and resort operator, Bloomberry Resorts (-20%), was the biggest detractor as the renewed surge in Covid-19 globally raised the risk of further lock down extensions. Chilean lithium producer, Albemarle (-12%), also sold off following the election results given President Boric’s hawkish stance on the privatization of lithium. Boric ran his campaign on a promise to “bury” the neoliberal economic model. We believe the stock is oversold and continue to like it.
It is worth highlighting events in Turkey, where the central bank cut its benchmark lending rate for the fourth month in a row despite consistently high inflation prints. The country’s deeply negative real interest rates have put huge pressure on the Turkish lira, which is down close 40% against the dollar since the central bank began lowering borrowing costs in September. On 20th December, in an unexpected turn of events, the Turkish government announced an FX protection option for local retail investors, under which, if they keep their deposits in lira, in addition to the interest, they would be compensated for any FX depreciation. While this did trigger a short-term rally in the lira, we continue to believe this unorthodox policy is unlikely to be effective in restoring confidence in the currency or economy. We currently have no exposure to the market.
We made relatively few changes to the portfolio in December. We trimmed our position in AKR Corpindo, a logistics and supply chain company in Indonesia, on the back of strong performance and in light of potential Omicron-related disruption.
Whilst the Omicron variant spread rapidly around the globe in December, markets generally looked past it as it became clear that while the variant is more transmissible, it seems less dangerous in severity.
Overall, for countries that have stable macro environments and have made timely progress in vaccination rollouts, we believe the global macro recovery provides a favourable backdrop to recover lost economic productivity. Valuations in a lot of the frontier end emerging markets remain attractive relative to their own history and also relative to the more evolved markets. We believe our opportunity set is a compelling universe to generate alpha.
Sources:
1BlackRock as at 31 December 2021
2MSCI as at 31 December 2021
21 January 2022
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
