BlackRock Frontiers Investment Trust plc

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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ESG Integration

The fund noted above does not commit to sustainable criteria nor does it have a sustainable investment objective.

BlackRock considers many investment risks in our processes. In order to seek the best risk-adjusted returns for our clients, we manage material risks and opportunities that could impact portfolios, including financially material Environmental, Social and/or Governance (ESG) data or information, where available. See our Firm Wide ESG Integration Statement for more information on this approach and fund documentation for how these material risks are considered within this product, where applicable.

Fund manager commentary

31 October 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 2.9 % in October 2024, outperforming its benchmark the MSCI Frontier + Emerging Markets ex Selected Countries Index (“Benchmark Index”) which returned -3.8%.

For reference, the MSCI Emerging Markets Index was down -4.4% while the MSCI Frontier Markets Index returned -0.6% over the same period. All performance figures are on a US Dollar basis with net income reinvested.¹

Emerging markets fell by 4.4% in October as Chinese headline stimulus disappointed and worries on geopolitical tensions and tariffs post US election results. Emerging markets underperformed developed markets with the MSCI DM index falling by 2.0%. All EM regions finished lower in October: CEEMEA (-3.2%) declined the least, EM Asia (-4.6%) performed in-line with MSCI EM and LatAm (-5.1%) underperformed.

Security selection performed well in October 2024. The largest contributor to returns was our holding in Bank of Georgia (+8.5%), which Recovered post the election worry from the Georgian Dream victory. Another stock that performed well was Kaspi (+3.9%), the Kazakh e-commerce and payments platform, which reversed some of its September 2024 losses as concerns on the short investment report were allayed. Our financials exposure in various markets also yielded positive results, most notably through our holdings in commercial banks KCB Group in Kenya and MCB Bank in Pakistan. Both companies benefited from good third-quarter results, which beat analyst expectations.

On the flipside, Turkish commercial bank Türkiye İş Bankası (-16.6%) fell alongside the Turkish market and was the largest detractor over the month. Another detractor was our position in Ayala Land (-13.8%), the Philippine's based property developer. Carry countries, including the Philippines, suffered as rate cut expectations moderated from high likelihood of a Trump win in the US election, and fears of inflation risks from tariffs and bigger fiscal impulse pushed 10-year U.S. Treasury yields up from 3.78% to 4.28%. Indonesian retailer Mitra Adiperkasa (-13.4%) also hurt performance, erasing some of the September gains on back of a weak print outside of its apparel business in the third quarter.

We made few changes to the portfolio in October. We increased our exposure to the UAE by initiating a position in Emaar Development, the development arm of Emaar Properties. The stock is trading at attractive valuations especially given our view on continued strength in their ability to pre-sell new developments. We also took advantage of recent weakness to top up our holding in Frontken, a Malaysia-based company specialising in providing equipment services to the semiconductor industry, as we anticipate strong results from their biggest client to drive ongoing revenue growth for the company. Elsewhere, we exited Hungarian oil and gas company MOL as the stock reached fair value by our estimates.

We continue to see improving activity levels in some frontier and smaller emerging markets. With inflation falling across many countries within our universe, rate cuts have started to materialize in some countries. 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, 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 31 October 2024.

Unless otherwise stated all data is sourced from BlackRock as at 31 October 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 portfolio manager and research analyst on the Global Emerging Markets Equities Team within the Fundamental Active Equity division of BlackRock's Active Equities Group. He is responsible for co-managing the BlackRock Frontier strategies, and serves as research analyst on the Emerging Frontier and Asia Pacific hedge funds as well as the broader Emerging Market and Asian strategies. Sudaif is a member of the EMEA, Frontier and ASEAN research pods, based in London. Mr. Niaz joined the Emerging Markets team in 2015 and since then has covered Middle-East, Eastern Europe, and ASEAN. He previously worked in New York for Perella Weinberg Partners and Caravel Management. He has also spent time in Asia and Africa sourcing and investing growth capital. Sudaif holds a BA in Economics from Northwestern University in Chicago and an MBA from INSEAD in France/Singapore.

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) is currently a non-executive director of Keystone Positive Change Investment Trust plc (where she is also the Senior Independent Director), AEW UK REIT plc, Montanaro Asset Management Limited and Chair of JP Morgan UK Small Cap Growth and Income plc. She was formerly a non-executive director of Premier Miton Group plc and Polar Capital Global Financials Trust 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) is currently a non-executive Director of Polar Capital Technology Trust plc and Chairman of Brown Advisory US Smaller Companies plc. He was formerly a non-executive director of Henderson Eurotrust plc, Aberdeen New India Investment Trust plc, JP Morgan European Discovery Trust plc, Global Special Opportunities Trust plc, Head of European and US Equities at British Steel Pension Fund, Head of European Equities at F&C Investment Management, Manager of F&C Eurotrust plc and Deputy Manager of the F&C Investment Trust plc. Prior to joining F&C in 1985, he held positions at Hill Samuel Asset Management, Phillips & Drew and PriceWaterhouse. He is a Chartered Accountant.

Hatem Dowidar (date of appointment 7 February 2024) is the Group CEO of e& and also holds roles as a non-executive Director of Vodafone Group, Etihad Etisalat Company (Mobily), Maroc Telecom & Etisalat Egypt. Previously, he worked for Vodafone, Procter and Gamble as well as Daimler Benz Group in various roles. He is a member of international forums such as the board of the GSM Association and the leadership panel of the United Nations Internet Governance Forum (IGF). His academic background includes a Bachelor’s in Communications and Electronics Engineering and an MBA.

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, a member of the advisory board of Ownership Capital and a member of the Investments Committee of the Royal Horticultural Society. Previously she was 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.