SICAV

Middle East & Africa Equity Fund

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

ISIN LU0310188205 WKN A0M1XR

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

-4.88%
$4.2m

1YR Return
(View Total Returns)

Manager Tenure

-23.90%
8yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.19
5.23%

Inception Date 04-Sep-2007

Performance figures calculated in USD

Other Literature

30-Jun-2020 - Oliver Bell, Portfolio Manager ,
Middle Eastern and African markets, along with the rest of the world, have been hard hit this year by the global spread of the coronavirus and a plummeting oil price. While the outlook remains uncertain, we continue to focus on the long-term fundamentals of our individual companies, their positioning, and the strength of their balance sheets to withstand these difficult times. Careful stock picking remains key, and the global market downturn has led to some particularly attractive valuations.
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

Many countries in the Middle East and Africa region are further behind the developed world in terms of the spread of the coronavirus and the lifting of lockdown measures; therefore, much uncertainty remains around the impact of the pandemic. We continue to focus on the long-term fundamentals of our individual companies, their positioning, and the strength of their balance sheets to withstand these difficult times. 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 country's macroeconomic outlook is looking 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 had been hoped for 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 volatility of the oil price 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 International Monetary Fund-backed reform agenda and loan program in 2019. If the political situation remains stable, this should drive a material improvement to 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 impacted by the volatility in the oil price. In Kuwait, structural domestic improvement and a government push on infrastructure projects had been key positives coming into 2020. The market's reclassification to emerging markets status by index provider MSCI has been pushed back to November 2020 due to the global spread of the coronavirus. We are selective on bottom-up ideas here. In Saudi Arabia, the IPO of Saudi Aramco, the world's largest integrated oil and gas company, late last year, brought increasing attention to the market. We are also selective here, looking for opportunities to add to our highest conviction names.

Overall, we believe 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. This will translate into strong corporate earnings growth that we believe can be sustained by various businesses in the years ahead. We believe that 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 % -23.90% -4.88% -4.35% 2.57% 3.78%
Indicative Benchmark % -19.25% -2.95% -3.34% 2.47% 1.65%
Excess Return % -4.65% -1.93% -1.01% 0.10% 2.13%

Inception Date 04-Sep-2007

Manager Inception Date 10-Oct-2011

Indicative Benchmark: Linked Benchmark Net

Data as of  30-Jun-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % -23.90% -4.88% -4.35% 2.57%
Indicative Benchmark % -19.25% -2.95% -3.34% 2.47%
Excess Return % -4.65% -1.93% -1.01% 0.10%

Inception Date 04-Sep-2007

Indicative Benchmark: Linked Benchmark Net

Data as of  30-Jun-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 05-Aug-2020 Quarter to DateData as of 05-Aug-2020 Year to DateData as of 05-Aug-2020 1 MonthData as of 30-Jun-2020 3 MonthsData as of 30-Jun-2020
Fund % -0.30% 1.52% -21.23% 2.17% 12.29%
Indicative Benchmark % 0.43% 3.81% -16.56% 5.16% 17.36%
Excess Return % -0.73% -2.29% -4.67% -2.99% -5.07%

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 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. 

30-Jun-2020 - Oliver Bell, Portfolio Manager ,
Global equities rose in June on the back of fiscal and monetary stimulus, combined with the reopening of economies. Middle Eastern and African markets outperformed their developed counterparts but lagged emerging markets. Within the portfolio, stock selection and an underweight position in South Africa contributed negatively. Not holding Anglogold Ashanti and Gold Fields dragged as the gold miners performed strongly on rising commodity prices. Our overweight holding in FirstRand, a bank, also hurt; domestic stocks suffered against a poor economic backdrop, notably the release of an emergency budget forecasting that the country’s budget deficit would more than double amid surging government borrowing. On the other hand, our underweight and stock selection in Saudi Arabia worked in the portfolio’s favour. Here, our overweight position in health care provider Dr. Sulaiman Al-Habib Medical Services added value. Inpatient and outpatient volumes have recovered better than expected in the second quarter, and the prospect of inclusion in FTSE and MSCI indices has also boosted the stock. Elsewhere, our overweight position in Moroccan retailer Label Vie was also beneficial to relative performance. As the coronavirus pandemic spread and associated lockdowns were announced, panic buying led to increased sales. In the second quarter, footfall decreased but the size of baskets remained elevated, benefitting the company.

Holdings

Total
Holdings
42
Largest Holding Naspers 9.65% Was (31-Mar-2020) 9.42%
Other View Full Holdings Quarterly data as of 30-Jun-2020
Top 10 Holdings 47.70% View Top 10 Holdings Monthly data as of 30-Jun-2020

Largest Top Contributor^

Naspers
By 3.03%
% of fund 9.49%

Largest Top Detractor^

Shoprite Holdings
By -0.51%
% of fund 2.29%

^Absolute

Quarterly Data as of 30-Jun-2020

Top Purchase

Saudi Basic Industries (N)
3.30%
Was (31-Mar-2020) 0.00%

Top Sale

Prosus
1.99%
Was (31-Mar-2020) 4.10%

Quarterly Data as of 30-Jun-2020

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

Saudi Arabia

We reduced our underweight allocation to Saudi Arabia, initiating positions in Saudi Basic Industries and Yanbu National Petrochemical. These stocks were oversold amid the sluggish price of oil, providing an attractive entry point.

Saudi Basic Industries is one of the largest petrochemical manufacturers in the world. The company has significant economies of scale and access to cheap feedstock from Saudi Aramco, which allows the company to seek to deliver resilient profitability despite volatile industry cycles. Furthermore, we believe that the stock's downside is tempered by the company's high free cashflow generation and strong cash position.

Yanbu National Petrochemical is a Saudi Arabia-based, pure play single site petrochemical company. It manufactures basic chemicals, intermediates and polymers. The company has a strong net cash position and we expect dividends to increase over time.

Egypt

We scaled back our exposure to Egypt, selling our position in Commercial International Bank. Given the disruption in supply chains, we expect to see weaker growth in working capital financing. Capital expenditures are also likely to be delayed.

We also reduced our position in snack food company Edita Food Industries. Management saw a broad-based recovery in demand starting in June, but sales are still running below pre-coronavirus levels. We believe it remains an industry leader with some of the best brands.

Prosus

We reduced our holding in Netherlands-listed Prosus which focuses on consumer technology in emerging markets. At current levels, we have a preference for the South African listing, Naspers, which owns 74% of Prosus.

Consumer Discretionary

We sold our holding in Jarir Marketing, a Saudi Arabian retailer of consumer electronics, technology products, books and school/office supplies. We eliminated our position on strength, after the company announced solid first-quarter results. The company has also been strengthening its e-commerce position, although it is likely to face increasing competition from Amazon.

We also eliminated our holding in Herfy Food Services, a Saudi Arabian fast food chain operator. The pandemic has weighed on the company and its industry in the near term. Looking further ahead, increased competition could be a headwind for the company.

Sectors

Total
Sectors
10
Largest Sector Financials 44.70% Was (31-May-2020) 45.81%
Other View complete Sector Diversification

Monthly Data as of 30-Jun-2020

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

Top Contributor^

Consumer Discretionary
Net Contribution 0.40%
Sector
0.04%
Selection 0.36%

Top Detractor^

Materials
Net Contribution -3.16%
Sector
-2.43%
Selection
-0.73%

^Relative

Quarterly Data as of 30-Jun-2020

Largest Overweight

Consumer Staples
By7.04%
Fund 12.81%
Indicative Benchmark 5.78%

Largest Underweight

Materials
By-12.23%
Fund 5.77%
Indicative Benchmark 18.00%

Monthly Data as of 30-Jun-2020

30-Jun-2020 - Oliver Bell, Portfolio Manager ,
In financials, we added to our position in a leading Kuwaiti bank. The bank faces a fairly benign liquidity environment and a material drop in the cost of funds, which should partially reduce net interest margin compression. The bank’s focus is on its existing base of around three million customers, rather than on taking on new risk in the current challenging environment. Its corporate division has been relatively strong from a growth perspective.

Countries

Total
Countries
13
Largest Country South Africa 28.40% Was (31-May-2020) 29.10%
Other View complete Country Diversification

Monthly Data as of 30-Jun-2020

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

Top Contributor^

Netherlands
Net Contribution 0.39%
Country
0.39%
Selection 0.00%

Top Detractor^

South Africa
Net Contribution -3.84%
Country
-0.59%
Selection
-3.25%

^Relative

Quarterly Data as of 30-Jun-2020

Largest Overweight

Morocco
By5.50%
Fund 7.08%
Indicative Benchmark 1.58%

Largest Underweight

Saudi Arabia
By-14.06%
Fund 20.83%
Indicative Benchmark 34.89%

Monthly Data as of 30-Jun-2020

30-Jun-2020 - Oliver Bell, Portfolio Manager ,
In South Africa, we scaled back our holding in a leading bank. While the has bank regained market share, particularly in its retail and business operations, a leadership change in the current environment has been poorly timed, in our view. The macroeconomic outlook in South Africa is clearly tough this year, not only as a result of the stringent lockdown at the outset of the coronavirus pandemic, but also because the country is a small, open economy, which is highly exposed to global growth trends. Moreover, South Africa entered the crisis already in a recession.

Team (As of 05-Aug-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
    8
  • Years investment
    experience
    22
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
    6
  • Years investment
    experience
    10

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.

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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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