BlackRock Frontiers Investment Trust plc (LON:BRFI) has announced its latest portfolio update.
All information is at 30 April 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 | 0.4 | -0.7 | 4.0 | 74.5 | 2.3 | 112.1 |
| Net asset value | 2.5 | 2.6 | 2.1 | 78.0 | 16.1 | 135.8 |
| Benchmark (NR)** | 1.3 | -1.9 | -8.9 | 35.3 | 8.3 | 79.2 |
| MSCI Frontiers Index (NR) | -1.1 | -2.9 | -14.9 | 18.7 | -1.6 | 58.9 |
| MSCI Emerging Markets Index (NR) | 0.2 | -3.9 | -3.8 | 17.4 | 7.1 | 51.3 |
| US Dollars: | ||||||
| Share price | 2.0 | 1.3 | 4.2 | 74.0 | -6.5 | 71.9 |
| Net asset value | 4.2 | 4.7 | 2.3 | 77.5 | 6.1 | 90.7 |
| Benchmark (NR)** | 3.0 | 0.1 | -8.8 | 34.8 | -1.2 | 45.5 |
| MSCI Frontiers Index (NR) | 0.5 | -0.8 | -14.8 | 18.3 | -10.2 | 28.1 |
| MSCI Emerging Markets Index (NR) | 0.2 | -3.5 | -5.3 | 15.1 | -3.8 | 20.0 |
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: | 182.56c |
| Net asset value – cum income: | 186.15c |
| Sterling: | |
| Net asset value – capital only: | 145.25p |
| Net asset value – cum income: | 148.10p |
| Share price: | 135.00p |
| Total assets (including income): | £280.4m |
| Discount to cum-income NAV: | 8.8% |
| 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 2022 interim dividend of 2.75 cents per share, declared on 26 May 2022, and paid to shareholders on 24 June 2022 and the 2022 final dividend of 4.25 cents per share, declared on 8 December 2022, and payable to shareholders on 19 January 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 | 38.5 | Indonesia | 17.4 | |
| Industrials | 14.5 | Saudi Arabia | 15.5 | |
| Energy | 14.5 | United Arab Emirates | 8.1 | |
| Materials | 13.6 | Kazakhstan | 8.0 | |
| Consumer Staples | 10.2 | Vietnam | 7.8 | |
| Information Technology | 5.4 | Thailand | 7.4 | |
| Communication Services | 4.4 | Hungary | 7.4 | |
| Consumer Discretionary | 3.2 | Chile | 5.9 | |
| Real Estate | 2.6 | Greece | 4.3 | |
| Health Care | 1.6 | Poland | 3.5 | |
| —– | Qatar | 3.1 | ||
| 108.5 | Colombia | 2.7 | ||
| —– | Argentina | 2.5 | ||
| Short positions | -3.8 | Egypt | 2.3 | |
| ===== | Philippines | 1.9 | ||
| Panama | 1.9 | |||
| Peru | 1.7 | |||
| Georgia | 1.7 | |||
| Malaysia | 1.5 | |||
| Kuwait | 1.3 | |||
| Romania | 1.0 | |||
| Kenya | 0.7 | |||
| Cambodia | 0.6 | |||
| Ukraine | 0.3 | |||
| —– | ||||
| Total | 108.5 | |||
| —– | ||||
| Short positions | -3.8 | |||
| ===== |
*reflects gross market exposure from contracts for difference (CFDs).
Market Exposure
| 31.05 2022 % | 30.06 2022 % | 31.07 2022 % | 31.08 2022 % | 30.09 2022 % | 31.10 2022 % | 30.11 2022 % | 31.12 2022 % | 31.01 2023 % | 28.02 2023 % | 31.03 2023 % | 30.04 2023 % | |
| Long | 107.9 | 106.1 | 107.3 | 107.3 | 106.2 | 107.4 | 106.2 | 110.7 | 112.4 | 111.9 | 106.3 | 108.5 |
| Short | 4.7 | 4.6 | 6.2 | 5.3 | 5.2 | 5.3 | 4.8 | 4.9 | 5.1 | 3.9 | 3.9 | 3.8 |
| Gross | 112.6 | 110.7 | 113.5 | 112.6 | 111.4 | 112.7 | 111.0 | 115.6 | 117.5 | 115.8 | 110.2 | 112.3 |
| Net | 103.2 | 101.5 | 101.1 | 102.0 | 101.0 | 102.1 | 101.4 | 105.8 | 107.3 | 108.0 | 102.4 | 104.7 |
Ten Largest Investments
| Company | Country of Risk | Gross market value as a % of net assets |
| Bank Central Asia | Indonesia | 5.1 |
| Astra International | Indonesia | 3.9 |
| PKO Bank Polski | Poland | 3.5 |
| Saudi Basic Industries Corp | Saudi Arabia | 3.2 |
| Abdullah Al Othaim Markets | Saudi Arabia | 3.2 |
| JSC Kaspi | Kazakhstan | 3.1 |
| OTP Bank | Hungary | 3.0 |
| Bank Mandiri | Indonesia | 2.9 |
| Wizz Air Holdings | Hungary | 2.9 |
| Halyk Savings Bank | Kazakhstan | 2.8 |
Commenting on the markets, Sam Vecht, Emily Fletcher and Sudaif Niaz, representing the Investment Manager noted:
The Company’s NAV was up by 4.2% in April, strongly outperforming its benchmark, the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”) which was up by 3%. For reference, the MSCI Emerging Markets Index had relatively muted performance and returned 0.2% while the MSCI Frontier Markets Index was up by 0.5% over the same period. All performance figures are on a US Dollar basis with net income reinvested.
The Company’s outperformance was primarily driven by country allocation particularly in Eastern Europe where gas prices moved close to the lowest levels since the beginning of the energy crisis boosting hopes of a stronger economic recovery and buoying equity markets. Oil prices also retreated to near levels seen before Russia’s invasion of Ukraine. This decline in energy prices and commodities at large should help temper the outlook for global inflation. We observe a growing consensus around peak US interest rates. A gradual reversal from here should bode positively for emerging markets, with the caveat of an unexpectedly severe recession in the US.
In our universe, Eastern European markets were the top performers, notably Poland (+13%), supported by strong earnings from the banking sector and optimism surrounding the consumer recovery. Elsewhere, Indonesia (+7%) did well from the gradual structural shift underway in its balance of payments from downstream nickel exports. On the other hand, equity markets in Turkey (-5%) and Thailand (-3%) were challenged given increased political uncertainty from general elections in both countries in May.
Several stock picks did well in April. It is encouraging to see earnings delivery and capital return by our holdings starting to reflect in market valuations. Polish Bank PKO (+17%) was the top performer following strong earnings results. Indonesian auto conglomerate Astra International (+15%) performed well given good results, and importantly, improved capital returns via larger than anticipated dividend payment. Kazakh bank Halyk (+16%) also contributed positively during the month on back of strong results and capital return. On the other side, Colombian bank Bancolombia was the weakest link (-12%) from the unexpected dismissal of the country’s finance minister. Mitra Adiperkasa (-7%) was the second worst performer; we believe this is from short-term profit taking as the Indonesian consumer confidence remains robust.
We made few changes to the portfolio in April. We trimmed our exposure to Colombia following news of the change in finance minister. We took some profits across a few names such as Saudi grocery operator Al Othaim which had an outsized move on heels of a bonus stock dividend and also in Argentinian energy company Vista on 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 this should enable compelling alpha opportunities.
Sources:
1BlackRock as at 30 April 2023
2MSCI as at 30 April 2023
You can discover more about the BlackRock Frontiers Investment Trust at blackrock.com/uk/brfi
