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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 WKN A0M1XR

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

6.05%
$5.3m

1YR Return
(View Total Returns)

Manager Tenure

-1.97%
8yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.14
4.38%

Inception Date 04-Sep-2007

Performance figures calculated in USD

Other Literature

30-Sep-2019 - Oliver Bell, Portfolio Manager,
Middle East and Africa markets are making meaningful economic and political improvements and the recent MSCI reclassification cycle is testament to these countries’ potential, in our view. Durable secular growth and low correlation to the global cycle are bringing increasing attention to what have historically been overlooked investment opportunities.
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 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 % -1.97% 6.05% -1.44% 4.26% 6.66%
Indicative Benchmark % 0.12% 4.97% -2.05% 3.77% 3.57%
Excess Return % -2.09% 1.08% 0.61% 0.49% 3.09%

Inception Date 04-Sep-2007

Manager Inception Date 10-Oct-2011

Indicative Benchmark: Linked Benchmark Net

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % -1.97% 6.05% -1.44% 4.26%
Indicative Benchmark % 0.12% 4.97% -2.05% 3.77%
Excess Return % -2.09% 1.08% 0.61% 0.49%

Inception Date 04-Sep-2007

Indicative Benchmark: Linked Benchmark Net

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 18-Oct-2019 Quarter to DateData as of 18-Oct-2019 Year to DateData as of 18-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % 2.35% 2.35% 3.38% 1.70% -7.94%
Indicative Benchmark % 1.14% 1.14% 3.35% -0.25% -7.37%
Excess Return % 1.21% 1.21% 0.03% 1.95% -0.57%

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.

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-Sep-2019 - Oliver Bell, Portfolio Manager,
Middle East and African markets were flat in September, underperforming their emerging and developed market peers. Kuwait lagged, as concerns about the health of the country’s elderly ruler, Sheikh Sabah, weighed on sentiment amid a lack of certainty over succession planning. Conversely, Saudi Arabia made gains, despite 50% of state-owned Saudi Aramco’s crude oil output had been disrupted early in the month by drone attacks on its facilities. Investors took comfort in reassurances that oil output would be restored earlier than expected, following a spike in oil prices of as much as 20% in the immediate aftermath of the air strikes. Within the portfolio, Nestle Nigeria contributed positively to relative returns. We believe the company’s operational excellence places it in pole position to benefit from the vast growth potential of Nigeria’s packaged food market. UK-listed Tullow Oil and Vivo Energy also boosted performance, as they were beneficiaries of a higher oil price in the month. In contrast, key detractors from relative returns included banking stocks National Bank of Kuwait and Gulf Bank, as sentiment in the Kuwaiti market was dented by the aforementioned concerns about succession in the country’s leadership.

Holdings

Total
Holdings
56
Largest Holding Al Rajhi Bank 6.02% Was (30-Jun-2019) 7.02%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 41.68% View Top 10 Holdings Monthly data as of 30-Sep-2019

Largest Top Contributor^

Label Vie
By 0.53%
% of fund 2.76%

Largest Top Detractor^

Al Rajhi Bank
By -0.85%
% of fund 5.99%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Prosus (N)
5.14%
Was (30-Jun-2019) 0.00%

Top Sale

Naspers
4.55%
Was (30-Jun-2019) 9.06%

Quarterly Data as of 30-Sep-2019

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

It was another active quarter on the trading front. We trimmed or eliminated several stocks to take profits on positions, which had rallied or where our investment thesis had played out. At the same time, we topped up stocks where we had a high conviction and/or where valuations had unexpectedly fallen back to attractive entry levels.

Overall on a country level, the biggest change in the portfolio was adding exposure to South Africa, where we moved less underweight the country.

Adding Exposure to South Africa

Our view of the domestic opportunities in South Africa is positive, as we envisage several economic catalysts to take effect in the coming months. These catalysts include: establishing a non-corrupt, slimmed down cabinet under President Cyril Ramaphosa, detailing plans of accelerating reforms, and addressing the issues with state utility company Eskom.

We added to the South African pay-TV and internet company Naspers, narrowing our underweight versus the benchmark for a second quarter running. Positive management meetings have added to our conviction in the company's strategy, which is to build three world-class businesses-classifieds, food delivery, and payments. We also have a positive view of Naspers listing 25% of its business in Amsterdam this coming September.

We also topped up our position in South Africa's largest listed insurer Sanlam, taking advantage of its attractive valuation. The business should perform well with any postelection improvement in the domestic economy. Management has a solid track record in effectively deploying excess cash into high-growth investments, while its strong brand and new business opportunities bode well for increasing return on equity (ROE) and maintaining a stable dividend.

We added to South Africa's third-largest bank, Absa, which is separating from Barclays Africa. The bank has undergone a period of change, including the launch of a new strategy and implementation of a new operating model, and we believe the market is underappreciating the group's earnings potential. It trades at a significant discount to peers.

Portfolio Activity in the UAE

We bought the digital payments business Network International, which has operations across Africa and the Middle East. The region is vastly underpenetrated from a payment standpoint-over 85% of transactions are still conducted in cash. Given its dominant market share, Network International is well positioned to benefit from the secular migration to digital payments, in our view, and as banks outsource payment capabilities over time.

Elsewhere in the UAE, we trimmed exposure to First Abu Dhabi Bank (FAB) after it reached our initial price target, but we remain overweight to the high-quality bank. Our thesis of strong liquidity, solid capital, and asset quality metrics remain intact, and the bank has the highest combined credit rating across the sector. With 25% market share and sovereign backing, we expect FAB to drive double-digit ROE.

In Saudi Arabia, we sold mineral and metal mining business Saudi Arabian Mining Company, locking in recent profits. The stock has made a decent recovery, but looking out, we see pressure to its aluminium operations, attributable to slow demand and trade tensions. The complexity of its state-owned enterprise structure and highly levered business were additional factors in our decision to sell.

Sectors

Total
Sectors
10
Largest Sector Financials 45.27% Was (31-Aug-2019) 45.31%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

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

Top Contributor^

Real Estate
Net Contribution 0.13%
Sector
-0.10%
Selection 0.23%

Top Detractor^

Financials
Net Contribution -0.47%
Sector
-0.05%
Selection
-0.41%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Consumer Discretionary
By10.50%
Fund 19.63%
Indicative Benchmark 9.12%

Largest Underweight

Materials
By-14.21%
Fund 1.70%
Indicative Benchmark 15.90%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Oliver Bell, Portfolio Manager,
We increased our exposure to the consumer discretionary sector. Here, we elected to switch our holding in a South African pay-TV and internet company into its international listing. The company listed 26% of its business in Amsterdam in September 2019, with the aim of addressing the stock’s NAV discount. Positive management meetings have added to our conviction in the company’s strategy, which is to build three world class businesses – classifieds, food delivery and payments.

Countries

Total
Countries
14
Largest Country South Africa 36.82% Was (31-Aug-2019) 41.00%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2019

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

Top Contributor^

Kuwait
Net Contribution 0.42%
Country
0.21%
Selection 0.21%

Top Detractor^

Qatar
Net Contribution -0.58%
Country
-0.58%
Selection
0.00%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Kuwait
By7.65%
Fund 13.09%
Indicative Benchmark 5.43%

Largest Underweight

Saudi Arabia
By-15.16%
Fund 14.77%
Indicative Benchmark 29.93%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Oliver Bell, Portfolio Manager,
In the United Arab Emirates (UAE), we sold our position in Emirates NBD Bank. We believe the bank faces medium-term risks associated with its investment in Turkey, which constitutes roughly 20% of assets and net income. Our concerns are primarily around asset quality and funding. We also topped up our position in a UAE digital payments provider, which operates in Africa and the Middle East, one of the most underpenetrated payments regions globally. We believe the company is well-positioned to benefit from structural growth in this area, and has presence across the entire value chain.

Team (As of 31-Aug-2019)

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
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% 190 basis points 2.07%
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.10%
Class Q $15,000 $100 $100 0.00% 100 basis points 1.17%

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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