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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.

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SICAV

Middle East & Africa Equity Fund

Unconstrained, growth-orientated investing in the under explored markets of the Middle East and Africa.

ISIN LU0310188205 Valoren 3428876

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

-2.82%
$4.5m

1YR Return
(View Total Returns)

Manager Tenure

-11.30%
9yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.14
5.37%

Inception Date 04-Sep-2007

Performance figures calculated in USD

Other Literature

31-Oct-2020 - Oliver Bell, Portfolio Manager ,
The long-term outlook for the Africa and Middle East region remains robust, despite the current global slowdown. Looking beyond the current crisis, growth in this region is likely to be driven by some of the world’s most attractive demographics, rising urbanization and levels of infrastructure investment, and a strong asset base in natural resources. There is much scope for economic improvement, driven by reform implementation and growing structural domestic demand.
Oliver Bell
Oliver Bell, Co-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.

Click for Manager Outlook
 

Strategy

Manager's Outlook

Against a challenging backdrop, we continue to focus on the long-term fundamentals, and we look to hold high-conviction ideas in quality companies that are in a strong position to withstand the current environment and emerge stronger on the other side of this crisis. Over the longer term, this region is likely to be bolstered by a recovery in regional growth and meaningful country-specific improvements, including economic reform. Over recent years, we have been encouraged by policymakers' attempts to cut subsidies to fuel, electricity, and gas as part of fiscal consolidation plans.

In South Africa, we had existing concerns regarding the disappointingly slow path to reform, and the economy entered the current crisis already in a recession. The macroeconomic outlook in South Africa is increasingly tough this year, not only as a result of the stringent lockdown at the outset of the coronavirus pandemic, but also because South Africa is a small, open economy, which is highly exposed to global growth trends. We focus on our highest-conviction ideas in well-run, quality companies.

In West Africa, sentiment in Nigeria has deteriorated due to a lack of reform leadership from President Muhammadu Buhari, which we had hoped would materialize after his win of a second term in office. Economic growth has been struggling to outpace population growth. More recently, this situation has been exacerbated by the oil price volatility and increasing concerns that capital controls may be introduced. In Kenya, the removal of the interest rate cap late last year was a positive catalyst for the market. We are able to find opportunities here, particularly given the recent market dislocation.

Egypt completed an IMF-backed reform agenda and loan program in 2019. If the political situation remains stable, this should drive a material improvement in the country's economic backdrop. While challenges still exist, including those to the tourism sector during the current crisis, we are starting to see signs of easing inflation, an improving budget deficit, and currency stability.

In the Middle East, oil-exporting nations have been heavily affected by volatility in the oil price. In Kuwait, structural domestic improvement and a government push on infrastructure projects had been key positives coming into 2020. We are selective here. In Saudi Arabia, the initial public offering of Saudi Aramco, the world's largest integrated oil and gas company, late last year, brought increasing attention to the market. We are selective on bottom-up ideas here but look for opportunities to add to our highest-conviction positions.

Overall, the long-term outlook for the Africa and Middle East region remains robust, despite the current global slowdown. Looking beyond the current crisis, growth in this region is likely to be driven by some of the world's most attractive demographics, rising urbanization and levels of infrastructure investment, and a strong asset base in natural resources. There is much scope for economic improvement, driven by reform implementation and growing structural domestic demand. In our view, this will translate into strong corporate earnings growth that can be sustained by various businesses in the years ahead. We believe the fundamentals generally remain intact and that strong growth will resume on the other side of the crisis.

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 companies in the developing countries of the Middle East and Africa.

Investment Approach

  • The fund is growth oriented, unconstrained and designed to deliver strong absolute performance.
  • Stock selection is driven by fundamental analysis seeking to identify the best companies with attractive valuations and earnings that are growing faster than their local, regional or global peers.
  • In investment frontiers such as the Middle East and Africa market, inefficiencies are likely to be significant. One of the core tenets of our investment strategy is that stocks are frequently mispriced.
  • Focus on finding companies with above-average revenue growth, strong management and good corporate governance.
  • The bottom-up, stock specific approach is supported by a top-down perspective focusing on macro and micro-factors mainly at the country level.
  • Manager with a proven track record of investing in emerging markets supported by a dedicated analyst team.
  • Dedicated Portfolio Manager supported by a well-resourced analyst team.

Portfolio Construction

  • Typically 50-80 stocks
  • Individual positions typically range from 2.0%-8.0%
  • Country and sector weights unconstrained
  • Cash reserves typically 0%-5%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % -11.30% -2.82% 0.06% 2.17% 4.46%
Indicative Benchmark % -7.77% -1.41% 0.80% 1.23% 2.31%
Excess Return % -3.53% -1.41% -0.74% 0.94% 2.15%

Inception Date 04-Sep-2007

Manager Inception Date 10-Oct-2011

Indicative Benchmark: Linked Benchmark Net

Data as of  31-Oct-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % -12.14% -3.19% 0.19% 2.28%
Indicative Benchmark % -5.86% -1.03% 1.42% 1.56%
Excess Return % -6.28% -2.16% -1.23% 0.72%

Inception Date 04-Sep-2007

Indicative Benchmark: Linked Benchmark Net

Data as of  30-Sep-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 25-Nov-2020 Quarter to DateData as of 25-Nov-2020 Year to DateData as of 25-Nov-2020 1 MonthData as of 31-Oct-2020 3 MonthsData as of 31-Oct-2020
Fund % 9.91% 11.06% -8.41% 1.05% 5.47%
Indicative Benchmark % 10.44% 9.02% -5.37% -1.29% 3.13%
Excess Return % -0.53% 2.04% -3.04% 2.34% 2.34%

Inception Date 04-Sep-2007

Indicative Benchmark: Linked Benchmark Net

Indicative Benchmark: Linked Benchmark 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.

Index returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 30 September 2010, the benchmark for the sub-fund was changed to S&P Emerging Market/Frontier Middle East & Africa Broad Market Index ex Israel. Prior to 30 September 2010, the benchmark for the sub-fund was MSCI Arabian Markets and Africa Index. Prior to 1 July 2009, the benchmark for the sub-fund was S&P IFCG Africa and Middle East ex-Saudi Arabia and ex-Israel. Prior to 1 September 2008, this benchmark also excluded Kuwait. The benchmark changes were made because the portfolio manager viewed the new benchmark composition to be a better representation of the investment strategy of the sub-fund. Historical benchmark representations have not been restated.

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-Oct-2020 - Oliver Bell, Portfolio Manager ,
Middle Eastern and African equities slipped modestly in October, underperforming their emerging market peers. South Africa was flat as concerns around the effects of the coronavirus on the country’s economy acted as a drag on sentiment. Investors were encouraged by President Ramaphosa’s speech mid-month, in which he delivered his economic recovery plan to parliament - although actual implementation remains the key variable. Saudi Arabia lost ground as the oil price tracked lower on demand pressures. The country’s economy shrank in the second quarter, with unemployment reaching a record high. In an attempt to stimulate economic activity, the country’s king issued an order reducing tax on real estate deals. Within the portfolio, stock selection in Saudi Arabia had by far the most positive impact. For example, shares in a wholesale and retail trader of electronics, home appliances, and communications solutions, posted strong gains on the back of a surge in quarterly profits. Stock selection within South Africa was also beneficial and, in particular, our holding in a retail bank whose shares continued to recover from the sharp sell-off earlier in the year on improving results. The company is winning market share from domestic-banking peers and deepening product penetration in its current retail client base.

Holdings

Total
Holdings
46
Largest Holding Naspers 9.62% Was (30-Jun-2020) 9.65%
Other View Full Holdings Quarterly data as of 30-Sep-2020
Top 10 Holdings 51.33% View Top 10 Holdings Monthly data as of 31-Oct-2020

Largest Top Contributor^

Al Rajhi Bank
By 2.64%
% of fund 8.49%

Largest Top Detractor^

Naspers
By -6.54%
% of fund 9.55%

^Absolute

Quarterly Data as of 30-Sep-2020

Top Purchase

Mondi (N)
1.63%
Was (30-Jun-2020) 0%

Top Sale

Saudi British Bank (E)
0.00%
Was (30-Jun-2020) 2.27%

Quarterly Data as of 30-Sep-2020

30-Sep-2020 - Oliver Bell, Portfolio Manager ,

We�shifted some of our exposure�in South Africa, particularly in financials, and continued to build our exposure to Saudi Arabia, although we remain significantly underweight. We increased the portfolio's exposure to materials and adjusted positioning within financials.

Saudi Arabia

Although we retained a significant underweight position in Saudi Arabia, we increased our exposure to this market over the course of the third quarter. In addition to increasing the size of our holding in National Commercial Bank, as described below, we also raised our position in consumer-oriented United Electronics. These purchases were partially funded through eliminating our holding in Saudi British Bank, a corporate and retail bank.

  • United Electronics engages in the wholesale and retail trading of electronics, home appliances, and communications solutions. In our opinion, it is one of the best-run consumer companies with a strong online presence and an emerging disruptive consumer finance business. We believe that market consolidation has the potential to partially offset headwinds from austerity and VAT.
  • While we believe that Saudi British Bank is well managed, we have concerns about asset quality and incremental provisioning needs, particularly in the contracting and manufacturing segments. In our opinion, shares reached a fair valuation point over the quarter, and we chose to sell out of our holding and focus on higher-conviction names within financials.

South Africa

The portfolio is overweight South Africa, but over the course of the review period, we�made a number of changes to our position, mainly through selling some of our financials exposure.

  • We eliminated our holding in Absa, South Africa's third-largest bank. Absa offers a complete range of retail, business, corporate, and investment banking; insurance; and wealth management products and services. We believe that shares reached a fair valuation over the period. We also have concerns around the bank's ability to navigate the difficult top-down environment in South Africa and view its balance sheet as being of lower quality than peers.
  • We reduced our holding in Sanlam, a South African diversified financial services group that provides financial solutions to individual and institutional clients. The company reported disappointing second-quarter results. Coronavirus-related business impacts and any potential credit-related provision could provide further headwinds for the stock.

Kuwait

Over the course of the third quarter, we modestly reduced our overall exposure to Kuwait as we believe that the market is more likely to be adversely affected by the impact of the pandemic than other Gulf Cooperation Council markets due to lower stimulus measures. We sold out of Mabanee, a Kuwaiti real estate investor, developer, and project manager. The stock had performed well for the portfolio in 2019, as the expansion of The Avenues Kuwait shopping and entertainment retail venue was completed.

Financials

As the third quarter began, the portfolio had an overweight position in financials, and over the review period, we adjusted this exposure through positions in National Commercial Bank and Ninety One.

  • We added to our existing holding in National Commercial Bank, Saudi Arabia's largest bank by total assets. The bank is, in our view, best in class and has exposure to the most attractive and fastest-growing mortgage segment in the country. Despite headwinds from COVID-19 (the disease caused by the coronavirus), falling oil prices, and lower rates, we believe this bank is well positioned to withstand the current challenging period and maintain its strong position within the market.
  • We added a new holding in asset management firm Ninety One. The founder-led firm, that has a dual listing in the UK and South Africa, is diversified by both geographies and product, which adds a defensive nature across cycles. Although the coronavirus is likely to weigh on assets under management and revenues in the near term, the firm has a solid track record of net inflows and a strong balance sheet. Furthermore, we see the firm as a potential target for ongoing industry consolidation over the longer term.

Materials

We retained a considerable underweight position in the materials sector, but over the course of the third quarter, we modestly raised our exposure where we saw a compelling opportunity. We initiated a position in Mondi, a paper and packaging company, which has a South African listing. The company is exceptionally well managed, in our opinion, and with a strong collection of assets. In terms of its cost position, we believe Mondi has a durable moat that should allow rents to accrue to the company over the cycle. Furthermore, Mondi is a beneficiary of two long-term trends. The first is the movement away from plastic to paper packaging, and the second is paper/board cost curve inflation, driven by increasingly expensive capital and tightness in the fiber (wood supply) in Europe.

Sectors

Total
Sectors
8
Largest Sector Financials 46.88% Was (30-Sep-2020) 47.41%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2020

Indicative Benchmark: MSCI Arabian Markets & Africa 10/40 IMI Index

Top Contributor^

Health Care
Net Contribution 0.88%
Sector
-0.02%
Selection 0.90%

Top Detractor^

Materials
Net Contribution -0.78%
Sector
-0.72%
Selection
-0.06%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

Consumer Staples
By6.69%
Fund 12.37%
Indicative Benchmark 5.68%

Largest Underweight

Materials
By-11.03%
Fund 6.23%
Indicative Benchmark 17.26%

Monthly Data as of 31-Oct-2020

31-Oct-2020 - Oliver Bell, Portfolio Manager ,
The portfolio has an overweight position in the consumer discretionary sector. Over the course of the month, we added to this exposure, building on our existing holding in an electronics and home appliances retailer. In our opinion, it is one of the best-run consumer companies in Saudi Arabia with a strong online presence and an emerging disruptive consumer finance business. We believe that market consolidation has the potential to partially offset headwinds from austerity and sales taxes.

Countries

Total
Countries
14
Largest Country South Africa 28.96% Was (30-Sep-2020) 28.06%
Other View complete Country Diversification

Monthly Data as of 31-Oct-2020

Indicative Benchmark: MSCI Arabian Markets & Africa 10/40 IMI Index

Top Contributor^

South Africa
Net Contribution 0.70%
Country
0.29%
Selection 0.41%

Top Detractor^

United Arab Emirates
Net Contribution -0.79%
Country
0.00%
Selection
-0.79%

^Relative

Quarterly Data as of 30-Sep-2020

Largest Overweight

United Kingdom
By7.11%
Fund 7.11%
Indicative Benchmark 0.00%

Largest Underweight

Saudi Arabia
By-8.40%
Fund 27.23%
Indicative Benchmark 35.62%

Monthly Data as of 31-Oct-2020

31-Oct-2020 - Oliver Bell, Portfolio Manager ,
The portfolio retains a significant underweight with respect to Saudi Arabia, although we raised our exposure to this market over the month. We added to our existing holding in the country’s largest bank by total assets. It is, in our view, best in class and has exposure to the most attractive and fastest-growing mortgage segment Saudi Arabia. Despite headwinds from COVID-19 (the disease caused by the coronavirus), falling oil prices, and lower rates, we believe this bank is well positioned to withstand the current challenging period and maintain its strong position within the market.

Team (As of 01-Oct-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
    2011
  • Years at
    T. Rowe Price
    9
  • Years investment
    experience
    23
Seun Oyegunle, CFA

Seun Oyegunle is the co-portfolio manager of the Africa & Middle East Fund in the Equity Division. 

Seun’s investment experience began in 2009, and he has been with T. Rowe Price since 2013, beginning as a research analyst, covering retail and other sectors across a number of emerging markets, in the Emerging Markets department of the Equity Division. Prior to this, Seun was employed by Asset and Research Management Ltd as an analyst covering the consumer goods sector. He also was employed by Vetiva Capital Management Ltd.

Seun earned an M.B.A. in finance from the University of Pennsylvania, The Wharton School, and a B.Sc. in chemical engineering from the University of Lagos. Seun also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2020
  • Years at
    T. Rowe Price
    7
  • Years investment
    experience
    11

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 190 basis points 2.07%
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.10%
N/A

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