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SICAV

Frontier Markets Equity Fund

Seeking to identify long-term market leaders in countries on the cusp of rapid development.

ISIN LU1079765662 Valoren 24785101

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

6.25%
$231.2m

1YR Return
(View Total Returns)

Manager Tenure

14.47%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.07
5.04%

Inception Date 24-Jun-2014

Performance figures calculated in USD

Other Literature

31-Dec-2019 - Oliver Bell, Portfolio Manager,
Economic conditions and investment opportunities vary widely among frontier markets, even those within the same region. While stock valuations are still reasonable, in our view, and the long-term growth outlook of many companies remains underpriced, we acknowledge that there will be individual winners and losers. We continue to hold our highest-conviction ideas. In a time of low global growth, our investment universe offers exposure to strongly growing countries and companies.
Oliver Bell
Oliver Bell, Portfolio Manager

Oliver Bell is a vice president of T. Rowe Price Group, Inc., associate head of Equity EMEA and the lead portfolio manager and chairman of the Investment Advisory Committee for the T. Rowe Price Middle East & Africa Equity Strategy and the Frontier Markets Equity Strategy. He is a member of the International Equity Steering Committee and a Board member of T. Rowe Price (Luxembourg) Management S.a.r.l.

 

Strategy

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks of frontier markets companies.

Investment Approach

  • Invest across the entire frontier investment universe, including countries outside the MSCI Frontier Markets Index.
  • Rigorous, risk-aware approach to identify quality growing companies trading at attractive valuations.
  • Employ fundamental analysis with a focus on returns, balance sheet structure, management team and corporate governance.
  • Disciplined approach to valuation. Verify relative valuation appeal versus peers and history.
  • Consider macroeconomic and political factors to temper bottom-up enthusiasm.

Portfolio Construction

  • Number of holdings: typically 60-80 stocks
  • Individual position sizes typically range from 0.5%-10%
  • Country Ranges:
    • Index countries: Unconstrained
    • Non-index countries: Constrained – 15% limit in any one country.
  • Reserves are typically less than 5%
  • Expected Turnover range: 20-40%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Annualised
Fund % 14.47% 6.25% 3.03% 2.25% 2.25%
Indicative Benchmark % 17.99% 9.15% 2.69% 0.43% 0.43%
Excess Return % -3.52% -2.90% 0.34% 1.82% 1.82%

Inception Date 24-Jun-2014

Manager Inception Date 24-Jun-2014

Indicative Benchmark: MSCI Frontier Market Index Net

Data as of  31-Dec-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 14.47% 6.25% 3.03% 2.25%
Indicative Benchmark % 17.99% 9.15% 2.69% 0.43%
Excess Return % -3.52% -2.90% 0.34% 1.82%

Inception Date 24-Jun-2014

Indicative Benchmark: MSCI Frontier Market Index Net

Data as of  31-Dec-2019

Performance figures calculated in USD

Recent Performance

  Month to Date Quarter to Date Year to Date 1 MonthData as of 31-Dec-2019 3 MonthsData as of 31-Dec-2019
Fund % N/A N/A N/A 3.19% 5.11%
Indicative Benchmark % N/A N/A N/A 4.34% 6.63%
Excess Return % N/A N/A N/A -1.15% -1.52%

Inception Date 24-Jun-2014

Indicative Benchmark: MSCI Frontier Market Index Net

Indicative Benchmark: MSCI Frontier Market Index Net

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

31-Dec-2019 - Oliver Bell, Portfolio Manager,
Frontier markets generated a solid return in December, outperforming their developed peers but lagging emerging markets. Growing optimism over global trade—the U.S. and China agreed to a partial trade deal—and accommodative policies from major central banks supported risk assets. Within the portfolio, our avoidance of Bahrain held back relative returns. Not holding Ahli United Bank (AUB) contributed negatively, as its shares rallied after the Central Bank of Kuwait approved Kuwait Finance House’s acquisition plans for AUB. Our overweight allocation and stock selection in Sri Lanka also hurt due to a continued sell off by foreign investors in the absence of any fresh policy announcements. Laggards included Ceylon Cold Stores, a soft drinks and ice cream manufacturer, and Dialog Axiata, a telecommunications services provider. Conversely, the top contributing stock was UK-listed Helios Towers, a leading infrastructure company focused on telecommunications towers. The company’s earnings margin has improved to an all-time high, which was attributed to growth in the Democratic Republic of Congo. Kuwaiti banks Boubyan Bank, Gulf Bank and Kuwait Finance House were also strong over the month, buoyed by MSCI’s announcement that it is upgrading Kuwait to emerging markets status in May 2020.

Holdings

Total
Holdings
67
Largest Holding Kuwait Finance House KSCP 9.61% Was (30-Sep-2019) 8.66%
Other View Full Holdings Quarterly data as of 31-Dec-2019
Top 10 Holdings 44.99% View Top 10 Holdings Monthly data as of 31-Dec-2019

Largest Top Contributor^

Kuwait Finance House KSCP
By 0.07%
% of fund 9.57%

Largest Top Detractor^

Military Commercial Joint Stock Bank
By -3.14%
% of fund 5.58%

^Absolute

Quarterly Data as of 31-Dec-2019

Top Purchase

Helios Towers (N)
1.79%
Was (30-Sep-2019) 0.00%

Top Sale

Masan
0.95%
Was (30-Sep-2019) 2.22%

Quarterly Data as of 31-Dec-2019

30-Sep-2019 - Oliver Bell, Portfolio Manager,

The biggest shift in portfolio positioning in the quarter was to sell most of our Argentinian holdings (except one remnant holding, Importadora Y Exportadora De La Patagonia). This decision was prompted by the surprise outcome in the primary elections in August-and while we can reinvest in Argentina, we are unlikely to do so anytime soon given the political uncertainty.

We also significantly reduced our position in Saudi Arabia following drone attacks on the oil fields of state-owned Saudi Aramco, which temporarily halved its production. Elsewhere, we increased our exposure to both Pakistan and Egypt, where we are finding attractive investment opportunities with cheap valuations.

Argentina

Political developments prompted us to sell most of our holdings in Argentina. This included the bank Grupo Financiero Galicia. We had already trimmed the position materially given election-related risk and in order to reduce our exposure following Argentina's upgrade to emerging markets status by index provider MSCI. We also sold Mercadolibre, Latin America's largest online trading platform, which has been a strong performer for the portfolio, due to its exposure to Argentina. Other sales included Banco Frances, Loma Negra, and Globant.

Saudi Arabia

We have reassessed our views on Saudi Arabia following the drone attacks on Saudi Aramco's facilities, which signaled heightened geopolitical risk, and the muted market reaction to the inclusion of the second tranche of Saudi Arabian stocks in the MSCI Emerging Markets Index. Saudi British Bank has struggled to overcome a worsening asset quality cycle, while the CEO has expressed concerns about the lack of loan growth, which added to our reasons for selling the stock. We also sold Saudi Company For Hardware, a retailing and wholesaling business, which has seen profit margins come under pressure amid aggressive promotional activity during the quarter.

Pakistan and Egypt

We entered the Pakistan market over the quarter with the purchase of food company Nestle Pakistan, which is a subsidiary of the Swiss multinational company. The company stands to benefit from improving consumer sentiment in Pakistan. In Egypt, meanwhile, we initiated a position in the country's largest private bank, Commercial International Bank. This is our favored stock pick in Egypt. We believe the bank is well positioned for an improved macroeconomic scenario, with ample liquidity and solid potential for corporate loan growth, particularly as interest rates come down.

Building Positions

After participating in the company's IPO earlier this year, we took advantage of an attractive valuation to increase our position in Network International, a digital payments provider that operates in Africa and the Middle East. The company operates in one of the most underpenetrated payment regions globally and is the only pan-regional provider of digital solutions at scale, with a presence across the entire value chain.

We also added to our position in Romania's second-largest bank, Banca Transilvania. The bank has a high-quality domestic franchise and leading returns, asset quality and capitalization, plus a strong management team with a focus on expansion.

Sectors

Total
Sectors
11
Largest Sector Financials 56.03% Was (30-Nov-2019) 54.72%
Other View complete Sector Diversification

Monthly Data as of 31-Dec-2019

Indicative Benchmark: MSCI Frontier Markets Index

Top Contributor^

Real Estate
Net Contribution 0.54%
Sector
0.16%
Selection 0.38%

Top Detractor^

Financials
Net Contribution -0.81%
Sector
0.10%
Selection
-0.91%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Consumer Discretionary
By7.11%
Fund 7.25%
Indicative Benchmark 0.14%

Largest Underweight

Communication Services
By-8.12%
Fund 4.95%
Indicative Benchmark 13.07%

Monthly Data as of 31-Dec-2019

31-Dec-2019 - Oliver Bell, Portfolio Manager,
We increased our overweight position in the consumer discretionary sector, by topping up an existing position in a Vietnamese operator of household appliance stores. The company operates three main store chains, specialising in mobile devices, consumer electronics and grocery retailing. It recently posted strong nine-month results, and the management’s suggestion that the addition of low-price appliances and kitchen wares would be margin accretive seems to be playing out.

Regions

Total
Regions
4
Largest Region Middle East & Africa 51.43% Was (30-Nov-2019) 50.28%
Other View complete Region Diversification

Monthly Data as of 31-Dec-2019

Indicative Benchmark: MSCI Frontier Markets Index

Top Contributor^

Developed Europe
Net Contribution 0.16%
Region
0.16%
Selection 0.00%

Top Detractor^

Pacific ex Japan
Net Contribution -0.65%
Region
-1.76%
Selection
1.11%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Pacific Ex Japan
By15.19%
Fund 33.80%
Indicative Benchmark 18.61%

Largest Underweight

Middle East & Africa
By-18.58%
Fund 51.43%
Indicative Benchmark 70.01%

Monthly Data as of 31-Dec-2019

Countries

Total
Countries
24
Largest Country Kuwait 32.14% Was (30-Nov-2019) 30.77%
Other View complete Country Diversification

Monthly Data as of 31-Dec-2019

Indicative Benchmark: MSCI Frontier Markets Index

Top Contributor^

Lebanon
Net Contribution 0.93%
Country
0.93%
Selection 0.00%

Top Detractor^

Kenya
Net Contribution -0.80%
Country
-0.80%
Selection
0.00%

^Relative

Quarterly Data as of 31-Dec-2019

Largest Overweight

Vietnam
By8.29%
Fund 24.08%
Indicative Benchmark 15.79%

Largest Underweight

Bahrain
By-5.76%
Fund 0.00%
Indicative Benchmark 5.76%

Monthly Data as of 31-Dec-2019

31-Dec-2019 - Oliver Bell, Portfolio Manager,
We retain our sizeable overweight position in Vietnam, a country which has been a particular beneficiary of the U.S.-China trade war. Vietnam is steadily growing exports to levels consistent with many developed countries and is transitioning from a focus on apparel manufacturing to becoming a significant exporter of technological equipment, particularly mobile phones and devices. Meanwhile, a young, highly productive middle class continues to emerge, and strong real wage growth, plus the emergence from a banking crisis, is boosting consumption.

Team (As of 06-Jan-2020)

Oliver Bell

Oliver Bell is a vice president of T. Rowe Price Group, Inc., associate head of Equity EMEA and the lead portfolio manager and chairman of the Investment Advisory Committee for the T. Rowe Price Middle East & Africa Equity Strategy and the Frontier Markets Equity Strategy. He is a member of the International Equity Steering Committee and a Board member of T. Rowe Price (Luxembourg) Management S.a.r.l.

Mr. Bell has 21 years of investment experience, seven of which have been with T. Rowe Price. Prior to joining the firm in 2011, Mr. Bell was head of emerging markets equities research at Pictet Asset Management (the institutional asset management arm of Pictet & Cie, the largest private bank in Switzerland), where his responsibilities included managing several funds, as well as a team of analysts. During his time at Pictet, Mr. Bell was directly responsible for managing investments in the emerging Europe, Middle East and Africa region as part of the global emerging markets and the standalone Middle East and Africa portfolios. Mr. Bell also managed the Global Emerging Markets High Dividend Yield Equity Strategy.

Mr. Bell has earned a bachelor of science degree in chemistry from Exeter University and also has earned the Investment Management Certificate.

  • Fund manager
    since
    2014
  • Years at
    T. Rowe Price
    8
  • Years investment
    experience
    22
Kanwal Masood

Kanwal Masood is a portfolio specialist in the Equity Division at T. Rowe Price, covering the Middle East and Africa Equity and Emerging Europe Equity Strategies. She is an associate vice president of T. Rowe Price International Ltd.

Ms. Masood has 10 years of investment experience, all of which have been with T. Rowe Price. She joined the firm in 2007, covering the global and regional emerging market equity strategies as a portfolio analyst. Prior to joining T. Rowe Price, she was a product specialist at the London Stock Exchange.

Ms. Masood earned a B.Sc. with honours in mathematics and computer science from King's College London.

  • Years at
    T. Rowe Price
    12
  • Years investment
    experience
    12

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 200 basis points 2.17%
Class I $2,500,000 $100,000 $0 0.00% 110 basis points 1.18%
Class Q $15,000 $100 $100 0.00% 110 basis points 1.27%
Class S $10,000,000 $0 $0 0.00% 0 basis points 0.07%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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