BlackRock Frontiers Investment Trust plc (LON:BRFI) has announced its latest portfolio update.
All information is at 31 August 2023 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 | -1.0 | 8.7 | 12.4 | 74.2 | 26.3 | 131.0 |
| Net asset value | 0.5 | 7.2 | 9.4 | 75.8 | 39.3 | 153.9 |
| Benchmark (NR)** | -1.6 | 2.2 | -7.4 | 31.0 | 11.2 | 79.8 |
| MSCI Frontiers Index (NR) | 0.6 | 6.0 | -7.8 | 16.5 | 15.5 | 69.8 |
| MSCI Emerging Markets Index (NR) | -4.7 | 1.2 | -7.0 | 1.3 | 7.7 | 48.3 |
| US Dollars: | ||||||
| Share price | -2.5 | 11.1 | 22.5 | 65.7 | 23.3 | 88.7 |
| Net asset value | -1.1 | 9.6 | 19.2 | 67.2 | 36.0 | 107.1 |
| Benchmark (NR)** | -3.1 | 4.5 | 0.8 | 23.9 | 8.4 | 47.3 |
| MSCI Frontiers Index (NR) | -0.9 | 8.4 | 0.4 | 10.3 | 12.6 | 38.0 |
| MSCI Emerging Markets Index (NR) | -6.2 | 3.5 | 1.3 | -4.1 | 5.0 | 20.5 |
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: | 194.32c |
| Net asset value – cum income: | 198.86c |
| Sterling: | |
| Net asset value – capital only: | 153.35p |
| Net asset value – cum income: | 156.94p |
| Share price: | 144.50p |
| Total assets (including income): | £297.1m |
| Discount to cum-income NAV: | 7.9% |
| Gearing: | nil |
| Gearing range (as a % of gross assets): | 0-20% |
| Net yield*: | 4.1% |
| Ordinary shares in issue**: | 189,325,748 |
| Ongoing charges***: | 1.36% |
| Ongoing charges plus taxation and performance fee****: | 1.36% |
*The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 4.1% and includes the 2022 final dividend of 4.25 cents per share, declared on 8 December 2022, and paid to shareholders on 19 January 2023, and the 2023 interim dividend of 3.10 cents per share, declared on 6 June 2023, and paid to shareholders on 7 July 2023.
** 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 | 40.6 | Indonesia | 14.3 | |
| Energy | 12.8 | Saudi Arabia | 14.2 | |
| Industrials | 12.3 | Thailand | 11.1 | |
| Materials | 12.2 | Kazakhstan | 8.3 | |
| Consumer Staples | 11.3 | United Arab Emirates | 8.2 | |
| Information Technology | 7.7 | Hungary | 6.8 | |
| Consumer Discretionary | 6.1 | Vietnam | 6.5 | |
| Communication Services | 4.5 | Philippines | 5.9 | |
| Real Estate | 4.0 | Chile | 5.3 | |
| Health Care | 1.8 | Qatar | 4.2 | |
| —– | Poland | 3.7 | ||
| 113.3 | Malaysia | 3.5 | ||
| —– | Colombia | 3.2 | ||
| Short positions | -3.0 | Multi-International | 2.2 | |
| ===== | Czech Republic | 2.1 | ||
| Argentina | 2.0 | |||
| Georgia | 1.9 | |||
| Greece | 1.8 | |||
| Peru | 1.4 | |||
| Turkey | 1.3 | |||
| Romania | 1.1 | |||
| Kuwait | 1.1 | |||
| Cambodia | 1.1 | |||
| Egypt | 0.9 | |||
| Ukraine | 0.6 | |||
| Kenya | 0.5 | |||
| Bangladesh | 0.1 | |||
| —– | ||||
| Total | 113.3 | |||
| —– | ||||
| Short positions | -3.0 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 30.09 2022 % | 31.10 2022 % | 30.11 2022 % | 31.12 2022 % | 31.01 2023 % | 28.02 2023 % | 31.03 2023 % | 30.04 2023 % | 31.05 2023 % | 30.06 2023 % | 31.07 2023 % | 31.08 2023 % | |
| Long | 106.2 | 107.4 | 106.2 | 110.7 | 112.4 | 111.9 | 106.3 | 108.5 | 112.9 | 116.9 | 113.0 | 113.3 |
| Short | 5.2 | 5.3 | 4.8 | 4.9 | 5.1 | 3.9 | 3.9 | 3.8 | 3.6 | 4.0 | 3.0 | 3.0 |
| Gross | 111.4 | 112.7 | 111.0 | 115.6 | 117.5 | 115.8 | 110.2 | 112.3 | 116.5 | 120.9 | 116.0 | 116.3 |
| Net | 101.0 | 102.1 | 101.4 | 105.8 | 107.3 | 108.0 | 102.4 | 104.7 | 109.3 | 112.9 | 110.0 | 110.3 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Bank Central Asia | Indonesia | 4.6 |
| FPT | Vietnam | 3.5 |
| JSC Kaspi | Kazakhstan | 3.2 |
| CP All | Thailand | 3.1 |
| Bank Mandiri | Indonesia | 3.1 |
| OTP Bank | Hungary | 3.1 |
| Bangkok Bank | Thailand | 2.9 |
| Halyk Savings Bank | Kazakhstan | 2.9 |
| Saudi National Bank | Saudi Arabia | 2.9 |
| PKO Bank Polski | Poland | 2.9 |
Commenting on the markets, Sam Vecht, Emily Fletcher and Sudaif Niaz, representing the Investment Manager noted:
The Company’s NAV fell by 1.1% in August, outperforming its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”) which fell by 3.1%. For reference, the MSCI Emerging Markets Index was down 6.2% while the MSCI Frontier Markets Index was down by -0.9% over the same period. All performance figures are on a US Dollar basis with net income reinvested.
Performance was challenged for several of the markets in our universe in August as risk sentiment weakened, putting pressure on equities. In Latin America, Colombia was down by 15.4%, erasing the gains from July, as growth continues to decelerate resulting in lower forward expectations for 2023/2024. In Asia, the Philippines was the region’s worst performer. The economy contracted resulting in GDP growth materially undershooting expectations amid weak domestic demand. In EMEA, performance was more mixed. Poland fell by 9.5% on the back of a larger-than-expected rate cut from the Polish central bank. On the other hand, Kazakhstan (+11.6%) and Hungary (+5.4%) were among the universe bright spots over the period.
Several stock picks in the Middle East benefitted the Company in August. Gulf International Services (+27.1%), the Qatar-based holding company, was the top contributor. The company’s Q2 earnings surprised on the upside and the share price was also helped by the company successfully concluding a debt restructuring deal at favourable terms with lenders. In Saudi Arabia, ELM continued its strong run (+26.8%). In UAE, Air Arabia (9.7%), the Emirati low-cost airline, also performed well. Elsewhere in our universe, Hungary’s OTP Bank (+11.9%) contributed positively after releasing strong results. As for detractors over the course of August, PKO Bank Polski (-10.9%) fell along with the Polish market more broadly and was the month’s largest drag on performance. Chilean brewer CCU (-11.6%) also fell. While the company reported strong EBITDA numbers ahead of consensus, the stock was impacted by weak Chile macro as the market was down -9.4%.
We made some changes to the portfolio in August. We continued adding to our holding in the Czech bank Komerční banka as we expect the country’s central bank to be one of the first to cut rates. In Asia, we increased our exposure to the Philippines by initiating a position in Metropolitan Bank. We exited Titan Cement, the Greek cement and building materials producer as our investment view has played out. Elsewhere, we took profits in Kaspi, the Kazakh payments and e-commerce company and in Advanced Info Systems, the Thai telecom services provider, following strong performance.
We believe global markets are still adjusting to a significantly higher cost of capital and remain vulnerable to unexpected hiccups such as the liquidity crisis in the regional banking space in the US. However, through the last few years, we have observed a marked contrast in the monetary and fiscal policy decisions taken in small emerging/frontier markets versus developed markets and this keeps us optimistic on our opportunity set. Our investment universe, in absolute and relative terms, remains under-researched and we believe this can enable compelling alpha opportunities.
Sources:
1BlackRock as at 31 August 2023
2MSCI as at 31 August 2023
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
