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T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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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 LU1079768849 Bloomberg TRPFMQG:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

12.98%
$106.0m

1YR Return
(View Total Returns)

Manager Tenure

44.85%
1yr

Inception Date 24-Jun-2014

Performance figures calculated in GBP

31-Jan-2020 - Oliver Bell, Portfolio Manager ,
Conditions and investment opportunities vary widely among frontier markets, even those within the same region. While stock valuations are still reasonable, and the long-term growth outlook of many corporations remains underpriced, we acknowledge that there will be individual winners and losers. We are selective on our bottom-up ideas and continue to hold our highest-conviction names. In a time of low global growth, our investment universe offers exposure to strongly growing countries and companies.
Johannes Loefstrand
Johannes Loefstrand, Portfolio Manager

Johannes Loefstrand is the Co-Portfolio Manager on the Frontier Markets Fund in the Equity Division of T. Rowe Price. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Click for Manager Outlook
 

Strategy

Manager's Outlook

The countries within the frontier universe have had wide-ranging experiences of the pandemic ? in terms of both the health impact and the associated restrictions on movement, as well as government stimulus measures. We continue to focus on the long-term fundamentals of individual companies, their positioning, and the strength of their balance sheets to withstand these difficult times. We are optimistic about the positive effects that the roll-out of vaccine programs will have on global economies including those in frontier markets.

Frontier markets are a heterogeneous group of countries and correlations between them are generally low. The economies within our universe are at varying stages of development and many individual stories are at play in terms of macroeconomic environments, geopolitics and the key sources of growth. Specific market considerations also apply, such as currency issues and the level of efficiency, liquidity and regulation. The investment universe is broad, and we believe that careful stock picking with a close eye on valuation is therefore key.

In Frontier Asia, after strict containment of the virus earlier on in the pandemic, Vietnam suffered its worst wave of infections more recently. However, we are pleased to see an acceleration in vaccination efforts and move to a more optimistic stance for the market's near-term outlook. Looking further ahead, we believe that the country offers a very attractive long-term opportunity. Our holdings are focused on those companies that we believe are most able to execute well in, or even benefit from, a difficult operating environment.� We are similarly cautiously optimistic on the outlook for Bangladesh, despite near-term challenges. We believe the economy is braced to bounce back in the coming quarters, and we are able to find companies with favorable valuations.

In Frontier Emerging Market, Pakistan, we are keeping a close eye on macroeconomics and geopolitics, particularly given the country's twin deficits, rising inflation and currency depreciation. However, the government has agreed to tough adjustments in order to secure a USD6 billion bailout package from the International Monetary Fund (IMF). We focus on high conviction ideas with strong bottom-up fundamentals, which are predominantly export businesses (meaning that they in fact benefit from currency weakness).

In Africa, sentiment in Nigeria had been weakening due to a lack of reform leadership from President Buhari and economic growth has been struggling to outpace population growth. More recently, this situation has been exacerbated by increasing concerns over capital controls, which keep us out of the market. In Kenya, the equity market is dominated by the country's largest telecommunications provider, which was able to grow its services before and during the pandemic. We focus on select high conviction bottom-up ideas in the country. Frontier Emerging Market Egypt completed an IMF-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, including those to the tourism sector during the current crisis, still exist, we are starting to see signs of easing inflation, an improving budget deficit and currency stability.

We believe that the markets in Frontier Europe are structurally well-placed to catch up with more developed markets. The European Union Recovery Fund will help to reduce macroeconomic risk going forward. Valuations are generally reasonable, and we find selective opportunities here, particularly in the financials space.

We believe frontier markets have a place in an investor's global portfolio. The macro fundamentals and demographics in many frontier markets today are favorable and, in some cases, resemble those of emerging countries approximately 20-30 years ago. These economies have the potential to grow much faster than those in the developed and emerging markets universes. Nearly 60% of the aggregate population in the frontier universe is below age 30, a young workforce that should drive economic growth and develop into a solid middle class of consumers in many countries. Of course, conditions and investment opportunities will vary widely among frontier markets, even those within the same region. While the current global crisis brings investment opportunities, and the long-term growth outlook of many corporations remains underpriced, we acknowledge that there will be individual winners and losers.

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.
  • Environmental, social and governance ("ESG") factors with particular focus on those considered most likely to have a material impact on the performance of the holdings or potential holdings in the funds’ portfolio are assessed. These ESG factors, which are incorporated into the investment process alongside financials, valuation, macro-economics and other factors, are components of the investment decision. Consequently, ESG factors are not the sole driver of an investment decision but are instead one of several important inputs considered during investment analysis.

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%

Recent Performance

  Month to DateData as of 07-Dec-2021 Quarter to DateData as of 07-Dec-2021 Year to DateData as of 07-Dec-2021 1 MonthData as of 30-Nov-2021 3 MonthsData as of 30-Nov-2021
Fund % -1.04% 3.93% 38.24% 0.73% 8.51%
Indicative Benchmark % 0.28% 1.41% 22.13% -1.15% 4.45%
Excess Return % -1.32% 2.52% 16.11% 1.88% 4.06%

Inception Date 24-Jun-2014

Indicative Benchmark: Linked Benchmark Net

Indicative Benchmark: Linked Benchmark Net

Performance figures calculated in GBP

Sectors

Total
Sectors
12
Largest Sector Financials 35.17% Was (31-Oct-2021) 33.28%
Other View complete Sector Diversification

Monthly Data as of 30-Nov-2021

Indicative Benchmark: MSCI Frontier Market 10/40 Index Net

Top Contributor^

Real Estate
Net Contribution 2.18%
Sector
1.27%
Selection 0.91%

Top Detractor^

Financials
Net Contribution -1.69%
Sector
-0.10%
Selection
-1.59%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Information Technology
By16.82%
Fund 16.82%
Indicative Benchmark 0.00%

Largest Underweight

Materials
By-9.49%
Fund 0.08%
Indicative Benchmark 9.57%

Monthly Data as of 30-Nov-2021

31-Oct-2021 - Johannes Loefstrand, Portfolio Manager ,
The portfolio’s main sector overweight positions are in information technology (IT) and consumer discretionary while the most significant underweight positions are materials, real estate, and financials. Within IT, we participated in the IPO of a payments company which has exclusive rights to process Egyptian government’s payments until 2027. Our investment thesis is that Egypt stands at the foot of a take-off in payments and fintech and the company is the key government vehicle to spearhead the drive to achieve this.

Regions

Total
Regions
5
Largest Region Pacific Ex Japan 48.97% Was (31-Oct-2021) 44.22%
Other View complete Region Diversification

Monthly Data as of 30-Nov-2021

Indicative Benchmark: MSCI Frontier Market 10/40 Index Net

Top Contributor^

Pacific ex Japan
Net Contribution 3.27%
Region
-0.79%
Selection 4.06%

Top Detractor^

EM EMEA
Net Contribution -0.73%
Region
-0.72%
Selection
-0.00%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Pacific Ex Japan
By14.24%
Fund 48.97%
Indicative Benchmark 34.73%

Largest Underweight

Middle East & Africa
By-17.81%
Fund 18.89%
Indicative Benchmark 36.70%

Monthly Data as of 30-Nov-2021

Countries

Total
Countries
18
Largest Country Vietnam 31.80% Was (31-Oct-2021) 30.79%
Other View complete Country Diversification

Monthly Data as of 30-Nov-2021

Indicative Benchmark: MSCI Frontier Market 10/40 Index Net

Top Contributor^

Vietnam
Net Contribution 3.27%
Country
-0.35%
Selection 3.62%

Top Detractor^

Bahrain
Net Contribution -0.79%
Country
-0.79%
Selection
0.00%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Egypt
By6.74%
Fund 6.74%
Indicative Benchmark 0.00%

Largest Underweight

Bahrain
By-7.05%
Fund 0.00%
Indicative Benchmark 7.05%

Monthly Data as of 30-Nov-2021

31-Oct-2021 - Johannes Loefstrand, Portfolio Manager ,
As of the end of October, our main country relative overweight positions included Egypt, Pakistan, and Kazakhstan, while the main underweights were Bahrain, Nigeria, and Morocco. Over the month, we initiated a position in a renewable energy (largely solar and wind) company in the Baltics region, through an IPO. In our view, the company came to the market at an attractive valuation which did not price in much capacity growth. We believe the company should grow capacity at a robust rate over the next decade, leaving room for a re-rating.

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% 200 basis points 2.17%
Class I $2,500,000 $100,000 $0 0.00% 110 basis points 1.20%
Class Q $1,000 $100 $100 0.00% 110 basis points 1.27%
Class S $10,000,000 $0 $0 0.00% 0 basis points 0.10%

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