The trust returned 3.8% over the MSCI Frontiers Markets Index in sterling terms while its share price increased by 31.7% over the period. Its performance is shown in the graph below.
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The UAE and Nigeria were particularly buoyant during the reporting period. The former rose 40% during the six months as the equity market caught up with the country’s economy, while investors flooded into Nigeria, sending its market up 35%.
As shown in the table, holdings in the Middle East and Africa account for more than half, 60.6%, of the fund’s total capital.
Other fund managers looking to Africa include Ashburton, which earlier in the week launched an Africa-focused equity fund, targeting the wealth of opportunities across the region.
Share issue
Strong performance has led the management team to consider increasing its capital base to meet high investor demand by issuing ‘C’ shares. It anticipates making a further announcement in the next few weeks.
Sam Vecht, Investment manager on the fund, said: “Record low bond yields are to widen their search for yield. In this context, Frontier Markets stand out for their high dividend yields, often in US pegged currencies with healthy growth prospects.”
He also noted that while frontier markets are not without risk, too much is priced into the equities of many markets, and he is confident frontier markets will continue to outperform traditional emerging markets during 2013.
“Emerging market returns have been muted so far this year, due to weaker than expected corporate results across some of the major markets and increased issuance, especially in Asia, which has absorbed much liquidity. In contrast to emerging markets, corporate results across Frontier Markets have surprised positively thus far and there has been minimal stock issuance.”
Strong management
Sam Vecht is head of BlackRock’s emerging markets specialist team, and manages the BlackRock Eurasian Frontiers Fund and the Mena Opportunities Fund and the BGF Emerging Markets Europe Fund and Emerging Markets Fund.
In January the firm launched the BSF Emerging Markets Absolute Return Fund, which is co-managed by Vecht and Henry Wigan. The fund consists of a portfolio of long and short equity exposures and aims to keep volatility to a minimum.
