Unlocking growth, diversification, and resilience through Frontier markets

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.

As experienced investors look to refine their portfolios for the next decade, many are searching for new sources of resilience and differentiated growth. While much of the world’s capital remains concentrated in familiar developed markets, a quieter revolution is underway in frontier and smaller emerging economies. In our view, these are places where growth is accelerating, but valuations and investor attention have yet to catch up.

Frontier markets offer portfolios a differentiated source of returns that tend to move independently from traditional equity markets. Additionally, they present an attractive income opportunity: numerous well-run companies in these regions generate robust cash flows and prioritize shareholder value. The MSCI Frontier Markets Index delivered a total return of 66.0% over the past five years, significantly outperforming the MSCI Emerging Markets Index, which returned 29.0% (total return in GBP terms, with income reinvested, as of end-July 2025).^1,2

† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. 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.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.

Frontier and smaller emerging markets, often overlooked and under-researched, may offer a rare combination of early-stage growth potential, attractive valuations, and the possibility of income, all within a professionally managed, carefully diversified portfolio like the BlackRock Frontiers Investment Trust (BRFI).³

Frontier markets are generally more sensitive to economic and political conditions than developed and emerging markets (e.g: Brazil, China, India, South Korea, Mexico, Russia, South Africa and Taiwan). 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.

Why invest in frontier markets now?

While the economies of developed markets like the UK and France tend to move more similarly, the same cannot be said for Kenya and Saudi Arabia, or Chile and Vietnam for example. These frontier economies are often in the early stages of development, where growth rates tend to be highest. In our view, they are home to younger populations and expanding middle classes which can create fertile ground for long-term investment.

Underrepresented

As of July 2025, BRFI’s benchmark (MSCI Frontier + Emerging ex Selected Countries Index) trades at a roughly 40.9% Price/Earnings discount to global equities (MSCI ACWI), a gap that has persisted even as fundamentals improve in many countries.

Yet, despite their promise, in our view frontier markets remain underrepresented in global indices and are often absent from mainstream global funds. This underexposure creates a potential advantage: we believe many of these markets are undervalued, under-researched, and under-owned. This can create a strong environment for skilled active managers to identify mispricing and unlock value through disciplined stock selection and on-the-ground research.

Geopolitics

At the same time, we believe that global geopolitical developments are modestly influencing trade flows and investment patterns, with certain economies within BRFI’s universe seeing incremental gains where policy, demographics, and investment cycles align. BRFI’s investment process is built to identify and harvest opportunities such as these, combining deep research, disciplined stock selection, and a global perspective to capitalize on these cycles, underpinned by a macro framework that provides a top-down view of country cycles, tracking factors like liquidity, external balances and policy shifts to guide where and when to deploy capital most effectively.²

Calendar Year returns (%) - figures on a total return GBP basis, with income reinvested, as at end-July 2025. Source: BlackRock

The figures shown relate to past performance. 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.

The portfolio is managed with a long-term lens, grounded in deep research and local insight. The team’s ability to identify inflection points allows them to position ahead of broader investor flows. Their experience across cycles, combined with a disciplined valuation framework, supports patient capital deployment in businesses with the potential to deliver outperformance versus the market.⁴ BRFI’s differentiated opportunity set is not just about cyclical rebounds, but about tapping into long term trends that can underpin resilient business models and sustainable earnings growth.

How does BRFI manage risk investing in frontier markets?

Investing in frontier markets comes with risks: lower liquidity, currency volatility, and political uncertainty. But these risks are not uniform—and they are not unmanageable. Frontier markets tend to be more influenced by domestic drivers —policy cycles, credit conditions and domestic demand, so country level returns often diverge from one another and from developed markets.

Low correlation between countries means that while one market may face headwinds, others are often experiencing growth or recovery. BRFI’s global remit allows the managers to rotate capital into areas of strength, ensuring that there are always opportunities to pursue, enabling the managers to harness a broader set of return drivers, diversifying the risk in the aggregate portfolio.

The BRFI strategy is built on selective stock picking, supported by deep on-the-ground research and local insights. By combining a range of uncorrelated frontier economies, the trust seeks to create a resilient portfolio that mitigates individual country risks while capturing broad-based growth. Over multiyear windows, the BRFI universe has exhibited lower historical volatility than mainstream Emerging Markets (EM) and weaker correlation to global indices, which is particularly useful when traditional markets feel crowded or fully valued. In practice, diversification means that even when one region stalls, others can be recovering—providing more places for active stock pickers to find resilience.

Differentiated Investment Process: Why a Global and Grounded Investment Approach Matters In Our View

BRFI’s portfolio managers use a macro-anchored country framework to track each market through economic and policy cycles—seeking to identify inflection points where policy reforms, improving external balances, or shifts in global trade can create new opportunities. This macro lens helps the team anticipate change and position ahead of the crowd.

Unlike many local investors who focus on a single market, BRFI’s managers operate across a global frontier universe. This helps them to spot repeating patterns, compare policy responses, and redeploy capital to where the balance of probabilities is improving. This global perspective is a key source of potential alpha.

BRFI’s managers spend significant time on the ground, meeting not just company management, but also competitors, suppliers, and regulators. This hands-on due diligence provides a real-world understanding of both businesses and the broader operating environment—insights that simply aren’t available from desk-based analysis alone.

Over years of investing across cycles, the team has built a long-term knowledge base of companies and countries, helping them to recognize patterns, anticipate risks, and identify opportunities that others might overlook. The result is a portfolio that is deliberately diversified across countries and sectors, with position sizes reflecting conviction, valuation, liquidity, and correlation.

For experienced investors finetuning allocations, BRFI can sit as a high conviction satellite around a global core, adding global diversification and the potential for disciplined alpha in markets where mispricing persists. Evidence of process efficacy is visible in long window numbers: to 31 July 2025, BRFI’s NAV delivered +6.3% YTD, +11.9% over one year, +40.4% over three years, +117.6% over five years and +203.4% since launch (Dec2010) (GBP, total return, net of fees), versus +6.1%, +9.7%, +12.5%, +49.0% and +105.5% for the benchmark over the same horizons.

† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. 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.

Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.

Harnessing Frontier Growth with Income Resilience

In our view, many well-run companies in this universe pair strong cash generation with a focus on shareholder returns, which can support distributions at the trust level. While BRFI does not target income, the trust’s current yield—around 4.7% as of December 2024 (gross) offers comfort during periods of volatility. For investors seeking both growth and a measure of income resilience, this natural yield can be a valuable feature, while the portfolio also seeks to compound stock specific alpha in an uncrowded opportunity set.

While, frontier and smaller emerging markets can be volatile, less liquid, and exposed to currency or political shifts, the investment trust structure of BRFI enhances flexibility, allowing managers to focus on what they believe to be the most compelling opportunities without being constrained by daily liquidity demands, and take a genuinely long-term view. The structure also allows for modest gearing, adding flexibility to capture compelling ideas without compromising risk discipline. Independent risk oversight, including continuous monitoring of factor exposures and concentrations, seeks to ensure that risk is intentional and managed.

For investors who are already engaged with markets and focused on refining their portfolios, BRFI offers a differentiated opportunity to add global diversification and disciplined alpha potential. It introduces distinct return engines that are not dominated by global mega-caps, spreads risk across many idiosyncratic countries and sectors and leverages a professional research moat in markets where mispricing persists.

The investment universe offers an opportunity to access a differentiated set of global frontier markets, many of which remain underrepresented in mainstream portfolios. BRFI provides access to premium long-term growth potential ahead of the crowd, while maintaining the clarity, rationale, and value alignment that experienced investors demand.

Summary

Many frontier economies are growing faster yet remain under-owned and under-researched—a combination that can leave mispriced opportunities for active stock-pickers. They also tend to move to local rhythms, so they bring low correlation versus mainstream equity indices—useful when other parts of a portfolio feel crowded or fully valued. BRFI’s process is built to systematically harvest inefficiencies, manage risk, and turn dispersion into opportunity—making it potentially suited for seasoned investors seeking disciplined alpha and global diversification.

¹ MSCI Frontier Markets Index, July 2025.
² MSCI Emerging Markets Index, July 2025.
³ BlackRock, Finding Growth in Overlooked Places, as at October 2025.
⁴ Alpha is an investing term that measures an investment strategy's ability to outperform the market. It represents the excess or abnormal return of an investment compared to a benchmark index, adjusted for risk. A positive alpha indicates the investment beat the benchmark, while a negative alpha means it underperformed.

Risk Warnings

Investors should refer to the prospectus or offering documentation for the funds full list of 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.

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 and depend on personal individual circumstances.

BlackRock Frontiers Investment Trust plc

Description of Fund Risks

Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.

Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.

Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed 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.

Frontier Markets: 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.

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.

Diversification and asset allocation may not fully protect you from market risk.

There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up. There is no guarantee that research capabilities will contribute to a positive investment outcome.

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.

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.

There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up. Diversification and asset allocation may not fully protect you from market risk.