The Aberdeen Frontier Markets investment trust is to wind down due to significant underperformance leaving Blackrock Frontiers as the only pure play option for investors seeking exposure to the asset class via an investment trust.
The £32m investment trust revealed its discount control policy, which was introduced less than two years ago, had triggered the wind down. It allows shareholders to exit the trust at the prevailing net asset value if the portfolio underperforms its benchmark over a two-year period.
Between July 2018 and June 2020, Aberdeen Frontier Markets has fallen 23.2% compared to a 0.4% fall in the MSCI Frontier Markets benchmark, according to FE Fundinfo.
The much larger £320m Blackrock Frontiers investment trust, which in 2018 adopted a bespoke benchmark including small emerging market economies, has fallen even further over that period losing investors 26.8%.
The Jupiter Emerging and Frontier Markets trust also covers the asset class but its biggest country weightings are in emerging markets such as Taiwan, China and Mexico. It has fallen 14% over the period but is benchmarked against the MSCI Emerging Markets index, which has returned 4.5% over the period. Its largest frontier markets weighting is a 5% allocation to Nigeria.
By contrast, the largest country allocations in the Aberdeen Frontier Markets investment trust are Vietnam, Egypt and Pakistan.
Frontier markets investment trust performance
| 3m | 6m | 1yr | 3yr | 5yr | |
| Aberdeen Frontier Markets Investment Company | 26.02 | -12.54 | -13.78 | -33.36 | -21.26 |
| Blackrock Frontiers Investment Trust | 20.40 | -23.80 | -26.17 | -26.06 | 9.23 |
| MSCI Frontier Markets | 16.92 | -9.67 | -7.84 | 0.37 | 27.35 |
Source: FE Fundinfo
The co-manager of the Blackrock Frontiers investment trust, Sam Vecht, has already experienced the wind-down of one of his investment trusts, Blackrock Emerging Europe, which investors unexpectedly voted to close in 2018. About a third of investors opted to roll over into the Frontiers Trust, which is also co-managed by Emily Fletcher.
But while shareholders are due to vote on the Aberdeen Frontier Markets wind down, the board has already stated that the size of the company is insufficient for a possible rollover. It also listed the prospects for frontier markets among the reasons why it was in the best interests of shareholders to wind down the fund.
An Aberdeen Standard Investments spokesperson confirmed there would be no job losses as a result of the wind down. The trust was run by the asset manager’s £40bn emerging market equities team, which also runs the $30m Aberdeen Standard Sicav I – Frontier Markets Equity fund.
Details on the length of time it would take to liquidate the Aberdeen Frontier Markets portfolio are to be published in a circular being sent ahead of the shareholder meeting.
See also: Sam Vecht: It was awkward when our investors voted to wind up
