Stock picking in the forgotten 40

The world’s smallest markets are widely neglected by investors. Emily Fletcher, Co-Manager of the BlackRock Frontiers Investment Trust plc (LON:BRFI), asks whether a change of market environment might bring about a new era for these unloved gems.

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested

The world’s smaller economies have much to offer. They house 30% of the world’s population and about 10% of the world’s GDP. Many of the dominant global trends – rapid urbanisation, digitalisation, logistics – are magnified in these markets, creating significant opportunities for local companies. Yet they remain unloved by global investors. Why?

At a time when environmental, social and governance considerations are at the forefront of investors’ minds, many of these smaller markets – home to 3bn of the world’s population – have been starved of capital. We believe investors may be deterred by a number of myths about these forgotten markets.


There is a perception that investment in these countries is a bet on a narrow range of sectors – banks, brewers and commodity companies. Certainly, these feature in the BlackRock Frontiers Investment Trust, but they sit alongside software companies in Vietnam, hospital operators in Southeast Asia, and airlines in Central America.

Equally, a bank in Kazakhstan is not the same as a bank in the US. While developed market banks are tied into the same system, banks within frontier markets will often march to the tune of an individual country, its regulatory framework, political outlook and domestic demand. Often, banks in these countries are growing and reflect the growing democratisation of finance for the world’s poorest people. This is a very different dynamic to Western banks.


There is also a perception that these markets are illiquid and difficult to access. Certainly, that can be the case, but the Trust doesn’t invest in any company that doesn’t have a fully audited set of accounts or that doesn’t have daily liquidity. That’s not to say that these markets don’t require careful work, but we travel to the countries and really get to know the businesses in which we invest. Despite trading daily, there are some liquidity constraints within these markets, and we believe that the closed end nature of the investment trust is an ideal vehicle for these markets.

Political risk is another criticism. The crisis in Ukraine has shown the vulnerability of some countries. We are aware that there can be challenges in these developing countries and if something goes wrong, with politics, macroeconomies, fixed income or currencies, we can get out. The Trust does not have to be invested everywhere or in any specific country. We’ve historically had substantial weightings in countries such as Nigeria or Turkey that barely feature in the portfolio today. 

Also, it is worth noting that although we invest in ostensibly risky countries – Kazakhstan, Philippines, Argentina, Vietnam – the effect of bringing them together is important. In general, while these markets can be volatile in isolation, they are fairly uncorrelated to each other. When Kazakhstan had problems early in 2022, it had no impact on Vietnam or Greece for instance.


While COVID has been a challenging time for these countries, we believe they are just starting to get going again and could see strong growth in the years ahead. Yet they are trading at a significant discount to the rest of the world.

It’s not just the speed of growth, it’s also the quality of that growth. The companies in our portfolio achieve earnings growth of 10-15% without any financial chicanery. They haven’t had money thrown at them during the period of zero interest rates, so haven’t made the poor investments that characterise periods of abundant capital.

In the meantime, few people are investing in these countries while valuations are low. Investors are looking for growth and we believe eventually they will discover frontier markets, which show strong structural and population growth.

These are the Forgotten 40 – not the vast emerging markets of India, Brazil or China, but all the others. There is a breadth of opportunities in these unloved countries. Eventually, we believe, investors will start to recognise the value they hold.

This material is not intended to be relied upon as a forecast, research or investment advice and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are from BlackRock as of April 2022 and may change as subsequent conditions vary.

You can discover more about the BlackRock Frontiers Investment Trust at

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Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Trust Specific Risks

Exchange rate risk: The return of your investment may increase or decrease as a result of currency fluctuations.

Emerging Europe risk: Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation.

Frontiers risk: The Company invests in a number of developing emerging markets (“Frontier Markets”). Frontier Markets tend to be more volatile than more established markets and therefore present a higher degree of risk as they are less well regulated and may be affected by political and social instability and other factors.

Gearing risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Important Information

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the fund specific risks in the Key Investor Document (KID) which gives more information about the risk profile of the investment. The KID and other documentation are available on the relevant product pages at We recommend you seek independent professional advice prior to investing.

This material is marketing material. The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange.

The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.

The BlackRock Frontiers Investment Trust plc currently conducts its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

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ID: MKTGH0422E/S-2102713

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