Almost a third of investors in Blackrock Emerging Europe have opted to roll over into an alternative emerging and frontiers market investment trust offered by the fund giant even though it offers limited exposure to Europe.
At a vote on 9 November, 31.4% of investors decided to roll their shares over into the Frontiers investment trust, co-managed by Sam Vecht and Emily Fletcher (pictured). The remainder chose to exit at NAV less costs. It followed a vote in June, where 60.75% of shareholders unexpectedly voted in favour of a tender offer to exit at net asset value forcing the fund, lead managed by Vecht, to liquidate.
The Frontiers trust has European exposure of 20.6%, a Blackrock spokesperson confirmed.
In a statement to Portfolio Adviser, Fletcher said approximately £38m will rollover into the Frontiers trust. She expected the bulk of proceeds to be invested “relatively quickly” with the remainder to be fully invested within two to three months of admission.”
“The £38m will increase the size of BRFI by around 14%, which we expect to have a positive impact on the liquidity of the company’s shares,” she said.
Frontiers trust versus Emerging Europe
Performance between the two investment trusts can vary substantially. While the Emerging Europe trust has dropped 1.45% over the last six months, the Frontiers trust has lost investors 13.16%. However, over five years the Frontiers trust has almost doubled the returns of Emerging Europe, returning 43.73% compared with 24.21%, according to FE Analytics.
Blackrock Emerging Europe vs Frontiers investment trust performance
| 3m | 6m | 1yr | 3yr | 5yr | |
| Blackrock Emerging Europe | -0.61 | -1.45 | -6.28 | 63.79 | 24.21 |
| Blackrock Frontiers Investment Trust | -9.71 | -13.16 | -7.97 | 52.97 | 43.73 |
| IT Global Emerging Markets sector | -10.13 | -8.73 | -9.39 | 31.33 | 18.38 |
Source: FE Analytics
While almost a third of investors will shift from the Emerging Europe to Frontiers, Portfolio Adviser has previously reported there is little crossover in holdings.
Romania is the only European countries to feature in the Frontiers’ geographical breakdown with a 4.7% allocation. Instead, Thailand, Indonesia and Argentina dominate the top-three allocations representing 7.4%, 7.3% and 6.9% respectively.
Russia, the largest country allocation in the Emerging Europe trust, does not sit within the Frontiers’ investment universe. Instead, the benchmark only includes Croatia, Serbia, Slovenia and Lithuania from within Europe, while Greece was added to the trust’s investment universe in April when it expanded to include the smallest economies from the MSCI Emerging Markets index.
Morningstar downgraded the investment trust in June due to concerns Vecht and Fletcher did not have enough experience investing in the countries that had been added to their investible universe.
