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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 Bloomberg TRPFMEI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

5.17%
$239.2m

1YR Return
(View Total Returns)

Manager Tenure

2.09%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.37
5.20%

Inception Date 24-Jun-2014

Performance figures calculated in USD

Other Literature

30-Sep-2019 - Oliver Bell, Portfolio Manager,
We believe the outlook for frontier markets should continue to improve as several country-level developments currently weighing on markets get resolved. With much of this already reflected in asset prices, markets are primed for an improvement in sentiment, in our view, as three catalysts – elections, MSCI reclassifications and trade and geopolitical developments – play out over the year.
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 % 2.09% 5.17% 0.62% 1.40% 1.40%
Indicative Benchmark % 5.87% 7.02% -1.28% -0.77% -0.77%
Excess Return % -3.78% -1.85% 1.90% 2.17% 2.17%

Inception Date 24-Jun-2014

Manager Inception Date 24-Jun-2014

Indicative Benchmark: MSCI Frontier Market Index Net

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 2.09% 5.17% 0.62% 1.40%
Indicative Benchmark % 5.87% 7.02% -1.28% -0.77%
Excess Return % -3.78% -1.85% 1.90% 2.17%

Inception Date 24-Jun-2014

Indicative Benchmark: MSCI Frontier Market Index Net

Data as of  30-Sep-2019

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 17-Oct-2019 Quarter to DateData as of 17-Oct-2019 Year to DateData as of 17-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % 0.93% 0.93% 9.92% -1.01% -1.65%
Indicative Benchmark % 0.49% 0.49% 11.20% -1.95% -1.09%
Excess Return % 0.44% 0.44% -1.28% 0.94% -0.56%

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. 

30-Sep-2019 - Oliver Bell, Portfolio Manager,
Frontier markets fell in September, underperforming their emerging and developed 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, Vietnam outperformed, benefitting from trade diversion effects caused by the U.S.-China tariff war—exports from Vietnam to the U.S. jumped 33% over the previous year in the first half of 2019. Within the portfolio, Vietnamese banks were among the top contributors to relative performance. This include our overweight positions in Military Commercial Joint Stock Bank, Vietnam Prosperity Joint-Stock Commercial Bank and Asia Commercial Bank. Domestic banks are benefitting from improving industry trends as balance sheets strengthen and economic leverage remains high. Conversely, our lack of exposure to Kenya held back relative returns. Leading mobile operator Safaricom, which is Kenya’s largest company by market value, was reported to have gained market share for the first time since September 2017 in June, adding customers to reach around 33.1 million users.

Holdings

Total
Holdings
68
Largest Holding National Bank of Kuwait 9.45% Was (30-Jun-2019) 9.81%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 43.53% View Top 10 Holdings Monthly data as of 30-Sep-2019

Largest Top Contributor^

Military Commercial Joint Stock Bank
By 2.69%
% of fund 5.89%

Largest Top Detractor^

National Bank of Kuwait
By -0.79%
% of fund 9.44%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Banca Transilvania
2.79%
Was (30-Jun-2019) 1.71%

Top Sale

Grupo Financiero Galicia (E)
0.00%
Was (30-Jun-2019) 1.76%

Quarterly Data as of 30-Sep-2019

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

MSCI's benchmark transition and review announcements continued to influence the performance of frontier countries, and we believe it remains a strategically useful time to capture new opportunities. From a trading perspective, this has meant we have trimmed or eliminated stocks to take profits on positions that have rallied or where our investment thesis has played out. On the other hand, we topped up positions where we have a high level of conviction and/or where valuations had unexpectedly fallen back to attractive entry levels.

The overall result of the trades from a country perspective was that we moved to a very small overweight in Kuwait from a significant underweight position, funded through reductions in our Argentinian and Saudi Arabian holdings. The latter two markets were upgraded by MSCI to its emerging markets index in May, which influenced our decision to reduce our weightings in the two countries. Kuwait, meanwhile, is due for index inclusion in June 2020, which should lend support to shares in the lead-up to the event.

On a sector level, we moved further overweight financials.

Increasing Exposure to Kuwait

We added a large holding in Kuwait Finance House in the quarter. We have had a succession of encouraging meetings with management, and the team has been refreshed with a few key hires from its peer, National Bank of Kuwait (a core portfolio holding). They have built up solid provisions, and a lower cost of risk-a good measure of a firm's potential for long-term success-should underpin double-digit earnings growth over the next three years.

We also topped up our position in Kuwait's fourth-largest bank, Gulf Bank. Like its peers, the bank should materially benefit from a declining cost of risk. Meanwhile, we see the bank regaining lost market share, particularly within its consumer sector, while accelerating topline growth should support a rerating from its current valuation.

Reducing Saudi Arabia and Argentina on MSCI Reclassifications

We eliminated Saudi Arabia's third-largest bank, Samba Financial, as we see increased risk across the sector. The sell was also a function of Saudi Arabia's move to the MSCI Emerging Markets Index-the country will soon leave our investable universe. Lower rate expectations are also affecting Samba and its peers, given currency linkage with the U.S. and a notable divergence with oil price dynamics.

In Argentina, we materially trimmed our holding in Grupo Galicia, taking profit after the banking stock's significant year-to-date rally. The move also helped us manage risk as election uncertainty picks up and to manage exposure levels now that Argentina has moved to the MSCI Emerging Markets Index. We retain our now off-index position given the bank's high-quality balance sheet and its exposure to Argentina's long runway for increased credit penetration.

Adding Financials Exposure

We added to Morocco's largest bank, Attijariwafa Bank. Its domestic operations have been achieving a decent loan growth and market share gains hit an all-time high this past quarter. From here, we see provisioning costs reaching a bottom against a backdrop of stable net interest margins and operational metrics.

Elsewhere in the sector, we established a position in Hatton National Bank, the second-largest listed bank in Sri Lanka. We view the stock as medium-term play on rising credit penetration and a rerating from stressed to more normalized valuations.

Sectors

Total
Sectors
11
Largest Sector Financials 54.17% Was (31-Aug-2019) 54.68%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: MSCI Frontier Markets Index

Top Contributor^

Consumer Discretionary
Net Contribution 1.02%
Sector
-0.26%
Selection 1.28%

Top Detractor^

Financials
Net Contribution -0.73%
Sector
-0.03%
Selection
-0.70%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Consumer Discretionary
By7.43%
Fund 7.58%
Indicative Benchmark 0.15%

Largest Underweight

Communication Services
By-10.46%
Fund 3.44%
Indicative Benchmark 13.90%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Oliver Bell, Portfolio Manager,
We reduced our underweight to the health care sector, adding a holding in a medical diagnostic services provider. We believe the company is the best positioned player in Egypt’s rapidly growing independent chain diagnostics market, and trades at an unwarranted valuation discount to peers given its growth prospects.

Regions

Total
Regions
5
Largest Region Middle East & Africa 51.24% Was (31-Aug-2019) 52.46%
Other View complete Region Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: MSCI Frontier Markets Index

Top Contributor^

Pacific ex Japan
Net Contribution 3.47%
Region
0.43%
Selection 3.04%

Top Detractor^

Latin America
Net Contribution -2.20%
Region
-2.20%
Selection
0.00%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Pacific Ex Japan
By13.77%
Fund 36.19%
Indicative Benchmark 22.42%

Largest Underweight

Middle East & Africa
By-15.61%
Fund 51.24%
Indicative Benchmark 66.84%

Monthly Data as of 30-Sep-2019

Countries

Total
Countries
26
Largest Country Kuwait 30.63% Was (31-Aug-2019) 32.25%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: MSCI Frontier Markets Index

Top Contributor^

Vietnam
Net Contribution 2.69%
Country
0.28%
Selection 2.41%

Top Detractor^

Argentina
Net Contribution -2.20%
Country
-2.20%
Selection
0.00%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Vietnam
By6.93%
Fund 25.99%
Indicative Benchmark 19.06%

Largest Underweight

Kenya
By-5.81%
Fund 0.00%
Indicative Benchmark 5.81%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Oliver Bell, Portfolio Manager,
We scaled back our exposure to Saudi Arabia in the month given concerns about heightened geopolitical risk and our view that valuations are no longer reflecting company fundamentals. This was prompted by drone attacks on Saudi Aramco’s oil facilities, which disrupted around 50% of its production—leading to a spike in oil prices of as much as 20% in the aftermath of the strikes. Among Saudi Arabian financials, we sold Saudi British Bank and Al Rajhi Bank, as well as United International Transportation in the industrials and business services sector.

Currency

Total
Currencies
N/A

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
    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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