Investment trusts

About this investment trust

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 Company’s investment objective is to achieve long term capital growth by investing in companies domiciled or listed in, or exercising the predominant part of their economic activity in, less developed countries. These countries (the “Frontiers Universe”) are any country which is neither part of the MSCI World Index of developed markets nor one of the eight largest countries by market capitalisation in the MSCI Emerging Markets Index as at 1 April 2018: being Brazil, China, India, Korea, Mexico, Russia, South Africa, and Taiwan.

Why choose it?

Frontier markets are smaller countries at an early stage of economic and political development. These economies don’t simply follow global markets but are subject to their own internal dynamics. Their growth potential often depends largely on their domestic outlook, which means they can thrive independently of the wider global economy. This Trust targets smaller, under-researched markets such as Vietnam, Egypt, Romania, and Chile. For investors, this can be a source of diversifying long-term income and growth.

Capital growth values may fluctuate, and the level of income may vary from time and is not guaranteed.

Suited to…

Investors looking to target the world’s youngest economies, which present exciting opportunities but may be volatile. This Trust suits those with a high appetite for risk, able to invest for the medium to long term.

What are the risks?

• 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.
• Overseas investment will be affected by movements in currency exchange rates.
• 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.
• Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
• Frontier markets are generally more sensitive to economic and political conditions than developed and emerging markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund. There may be larger fluctuations to the value of your investment and increased risk of losing your capital.

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Fund manager commentary

30 April 2024

Comments from the Portfolio Managers

Please note that the commentary below includes historic information in respect of the performance of portfolio investments, index performance data and the Company’s NAV and share performance.

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

The Company’s NAV fell by 3.1 % in April, underperforming its benchmark the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index (“Benchmark Index”) which returned -1.7%.¹

For reference, the MSCI Emerging Markets Index was up by 0.4% while the MSCI Frontier Markets Index was down by 3.0% over the same period. All performance figures are on a US Dollar basis with net income reinvested.

Emerging markets (+0.4%) significantly outperformed developed markets in April, which ended the month down -3.7%. EMEA finished the month flat (+0.2%). Latin America (-3.5%) lagged all other regions on Fed re-pricing.

While stock selection did well in April, our country allocation detracted. It was a tough month for Indonesia (-8.5%) as banking sector data released during the month showed some signs of asset quality deterioration. In addition, data released for Q1 showed that there had been somewhat of a hiatus in economic activity over the elections which took place in February. New President Prabowo Subianto with vice Presidential running mate Gibran Rakabuming swept the election on promises of continuing previous President Jokowi’s policies. Given Gibran is Jokowi’s son, we believe the expectations for policy continuity are fair. We were also hurt by overweight positions in both Kenya (-8.1%) and Philippines (-5.8%) which fell on as the US continued to print higher than expected CPI data pushing out further expectations for a cut in rates. Fears around this peaked mid-April and we have seen a substantial reversal of these concerns since then and continue to have confidence in our current positioning.

At the other extreme, Turkey (+14.1%), a market where we currently have little exposure, outperformed as markets responded the comments indicating continued monetary orthodoxy. Foreign inflows were c$500m in the month, some of the strongest levels in the past several years. Pakistan (+7.5%) continued to benefit from policy changes they have enacted in order to reach an agreement with the IMF which was finalised at the end of March.

Nagacorp (+20.5%), the Cambodian integrated gambling resort operator, was the best performing stock over the month as company reported continuing strong results and we continued to see increased incidence of Chinese travellers enjoying foreign travel. Elsewhere in Asia, Vietnamese IT services provider FPT Corp (+5.0%) also did well. The stock rose following news of a co-investment with NVIDIA in an AI factory in Vietnam. Argentinian energy company Vista Energy (+4.3%) rose after reporting strong results showing further significant production growth. The Polish supermarket chain Jeronimo Martins (4.1%) was another contributor, reversing losses from March, after delivering a beat on Q1 net income numbers.

On the flipside, IT services company EPAM (-14.8%) detracted amid weaker full year guidance for revenues. Philippine's based property developer Ayala Land (-13.3%) was another detractor on concerns that higher rates globally would curtail Philippine property demand. Actually post month end we saw the company report a presale result up 20% year on year and the highest level since Q4 19, beating expectations. Indonesian retailer Mitra Adiperkasa (-15.6%) fell as the company reported weak results, particularly in the Food and Beverage segment where they have been hurt by the domestic boycott of Starbucks which has followed the conflict in the Middle East.

Over the course of April, we made a few changes to the portfolio. We initiated a holding in tech conglomerate Sea Ltd as we have a positive view on the company's ability to deliver earnings upgrades. We took advantage of recent weakness and added to our holding in Indonesian property developer Ciputra another developer reporting very strong demand and record pre-sales numbers. We also rotated our financials exposure in Indonesia by exiting Bank Rakyat and buying Bank Mandiri due to concerns that the future credit cost in the microfinance book for Rakyat will be significantly higher than historically as the structure of the book has changed. Elsewhere, we locked in some profits by trimming our exposure to Colombian bank Bancolombia.

As higher global rates continue to feed through into the real economy, we expect some moderation of demand in developed markets. We note slowing credit growth in particular in the US. In contrast, we continue to see improving activity levels in frontier and smaller emerging markets. With inflation falling across many countries within our universe, rate cuts have started to materialise in some areas of our universe. This is a good set up for domestically oriented economies to see a cyclical pick up. We remain positive on the outlook for small emerging and frontier markets versus developed markets, and we find significant value in currencies and equity markets across our investment opportunity set. Our investment universe, in absolute and relative terms, remains under-researched and we believe this should enable compelling alpha opportunities.

¹ MSCI as at 30 April 2024.

Unless otherwise stated all data is sourced from BlackRock as at 30 April 2024.

Risk: Reference to the names of each company in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment recommendation of those companies

BlackRock Frontiers Investment Trust plc will not invest more than 10% of its gross assets in other closed-ended listed investment funds.

Portfolio manager biographies

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.

Sam Vecht, CFA, Managing Director, is Head of Emerging Europe, Frontiers and Alternative Strategies and a portfolio manager within BlackRock’s Fundamental Equity Group. Mr. Vecht is lead portfolio manager for the Emerging Markets Equity Strategies Fund and also co-manages the Latin America, Emerging Europe, Emerging Frontiers Hedge Fund, Frontiers, and Asia Pacific Absolute Return strategies. He is also a research pod leader of the EMEA & Frontiers pod.

Mr. Vecht's service with the firm dates back to 2000, including his years with Merrill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006.

Mr. Vecht earned a BSc degree, with honours, in international relations and history from the London School of Economics.

Emily Fletcher, CFA, Managing Director, is a portfolio manager and a research analyst on the Global Emerging Markets Equities Team within BlackRock’s Fundamental Equity Group. She is responsible for co-managing the BlackRock Frontier Investment Trust, the Emerging Frontier hedge fund, Emerging Markets Sustainable Equity and the Emerging Market Equity Income strategies.

Mrs. Fletcher joined the Emerging Markets team in 2008 and since then has covered African, ASEAN, Frontier and Latam equities and is based in London.

Prior to moving to her current role in 2008, Ms. Fletcher was a member of the Multi-Asset Portfolio Strategies (MAPS) group and the UK Equity team. She joined BlackRock as an Analyst in 2006.

Mrs. Fletcher earned a BA degree and an MSc degree in experimental and theoretical physics, both from the University of Cambridge in 2005 and 2006, respectively.

Sudaif Niaz, Director, is a research analyst on the Global Emerging Markets Equities Team within the Fundamental Active Equity division of BlackRock's Active Equities Group. Sudaif covers Indonesia, Saudi Arabia, Qatar, Turkey, Malaysia, and other emerging market equities based out of London. Sudaif has 14 years emerging markets investment experience.

He joined Blackrock in 2015 and previously worked in New York for Perella Weinberg and Caravel Management. Sudaif holds a BA in Economics from Northwestern University in Chicago and an MBA from INSEAD.

Board of directors

All the Directors are independent of the Investment Manager and are members of the Audit & Management Engagement Committee.

Katrina Hart (Chair with effect from 6 February 2024) (date of appointment 1 October 2019) currently a non-executive director of Keystone Positive Change Investment Trust plc, Montanaro Asset Management Ltd, JPMorgan UK Smaller Companies Investment Trust plc and of AEW UK REIT plc. She was formerly a non-executive director of Polar Capital Global Financials Trust Plc and Premier Miton Group plc. Mrs Hart spent her executive career in investment banking, advising, analysing and commentating on a broad range of businesses. Initially working in corporate finance at ING Barings and Hawkpoint Partners, she then moved into equities research at HSBC, covering the General Financials sector. Latterly, Mrs Hart headed up the Financials research teams at Bridgewell Group plc and Canaccord Genuity, specialising in wealth and asset managers.

Stephen White (Chairman of the Audit and Management Engagement Committee) (appointed 13 July 2016) qualified as a Chartered Accountant at PwC before starting a career in investment management. He has more than thirty five years' experience of managing investment portfolios, most notably twenty as Head of European Equities at F&C Asset Management and ten as Head of European and US equities at British Steel Pension Fund. Stephen is a Non-Executive Director of Henderson EuroTrust plc, JP Morgan European Smaller Companies Trust plc, Polar Capital Technology Trust plc, Henderson EuroTrust plc and Brown Advisory US Smaller Companies PLC. He was formerly a non-executive director of Aberdeen New India Investment Trust plc.

Hatem Dowidar (date of appointment 7 February 2024) is the Group CEO of e&. He joined the e& Group in September 2015 as Group Chief Operating Officer and was appointed as CEO, International in March 2016, before becoming Group CEO in 2020. He is currently a board member of Etihad Etisalat Company (Mobily), Maroc Telecom, e& Egypt, Careem Technologies, Abu Dhabi Chamber of Commerce & Industry and GSM Association. He is also a member of the United Nations International Governance Forum Leadership Panel.

Liz Airey (Senior Independent Director with effect from 6 February 2024) (date of appointment 10 December 2021) is currently Chairman of abrdn UK Smaller Companies Growth Trust plc, Chairman of Rolls-Royce UK Pension Fund Trustees Limited, a non-executive Director of Kirk Lovegrove & Company Limited and a member of the Investments Committee of the Royal Horticultural Society. Within the past five years, she has also been non-executive Chairman of Jupiter Fund Management plc, a non-executive Director of Tate & Lyle plc, a non-executive Director of Dunedin Enterprise Investment Trust plc and a member of the Investment Committee of the Institute of Chartered Accountants in England and Wales. In her executive career she was Finance Director of Monument Oil and Gas plc, a post she held from 1990 until the sale of the company to Lasmo plc in 1999.

Lucy Taylor-Smith (date of appointment 10 December 2021) was previously Global Head of Strategy with Standard Chartered Bank based in Singapore. Prior to this, she was Chief Strategy Officer and a member of the Executive Committee at Manulife Asia, and Chairman of Manulife Singapore, as well as Chief Strategy Officer and Board Director for Prudential Corporation Asia. She also spent 13 years with UBS advising companies on a wide range of strategic initiatives and corporate transactions encompassing mergers and acquisitions, equity and debt capital markets deals, culminating in her position as Executive Director of Corporate Broking.