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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 LU1079765662 Bloomberg TRPFMEI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

16.10%
$106.6m

1YR Return
(View Total Returns)

Manager Tenure

59.04%
1yr

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.02
5.82%

Inception Date 24-Jun-2014

Performance figures calculated in USD

31-Oct-2021 - Johannes Loefstrand, Portfolio Manager ,
The economies within the frontier markets 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. The investment universe is broad, and we therefore believe that careful stock picking with a close eye on valuation is key.
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%

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Fund % 59.04% 16.10% 10.90% 6.21% 39.77%
Indicative Benchmark % 36.77% 14.14% 10.76% 3.64% 23.54%
Excess Return % 22.27% 1.96% 0.14% 2.57% 16.23%

Inception Date 24-Jun-2014

Manager Inception Date 01-Jan-2021

Indicative Benchmark: Linked Benchmark Net

Data as of 31-Oct-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 49.69% 11.57% 9.62% 5.38%
Indicative Benchmark % 33.51% 11.31% 9.81% 3.13%
Excess Return % 16.18% 0.26% -0.19% 2.25%

Inception Date 24-Jun-2014

Indicative Benchmark: Linked Benchmark Net

Data as of 30-Sep-2021

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 26-Nov-2021 Quarter to DateData as of 26-Nov-2021 Year to DateData as of 26-Nov-2021 1 MonthData as of 31-Oct-2021 3 MonthsData as of 31-Oct-2021
Fund % -1.61% 4.64% 37.52% 6.35% 10.19%
Indicative Benchmark % -3.11% 0.77% 19.70% 4.00% 7.81%
Excess Return % 1.50% 3.87% 17.82% 2.35% 2.38%

Inception Date 24-Jun-2014

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.

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 January 2020, the benchmark for the sub-fund changed to MSCI Frontier Markets 10/40 Index Net. Prior to this change, the benchmark was MSCI Frontier Markets Index Net. 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-2021 - Johannes Loefstrand, Portfolio Manager ,
Frontier equities delivered strong returns in October. In Vietnam, the improved sentiment reflected a continued fall in the number of COVID-19 cases, the vaccination rollout that allowed several cities and provinces to reopen, and a growing sense that the worst of the pandemic may be behind the country. A higher oil price helped several oil revenue-dependent markets such as Bahrain, Oman, and Nigeria, post gains. At the portfolio level, our off-benchmark position in Egypt was by far the most significant contributor to relative performance while stock selection within Vietnam was also beneficial. In the former, shares in a payments company rose sharply following its initial public offering (IPO). Our position in a Vietnamese property developer also made a positive contribution; the company is viewed as a direct beneficiary of a reopening of Vietnam’s economy. Our overweight exposure to Kazakhstan further bolstered relative returns, although this effect was partially offset by the negative impact of our choice of securities within this market. Conversely, our off-benchmark position in Pakistan held back portfolio returns, as did our choice of securities in Romania.

Holdings

Total
Holdings
48
Largest Holding Mobile World Investment 7.07% Was (30-Jun-2021) 7.61%
Other View Full Holdings Quarterly data as of  30-Sep-2021
Top 10 Holdings 47.31% View Top 10 Holdings Monthly data as of  31-Oct-2021

Largest Top Contributor^

Mobile World Investment
% of fund 7.04%

Largest Top Detractor^

BRAC Bank
% of fund 4.53%

^Absolute, percentages based on the difference between the total net assets of the two largest holdings of the fund.

Quarterly Data as of 30-Sep-2021

Top Purchase

Kaspi.KZ JSC (N)
3.75%
Was (30-Jun-2021) 0%

Top Sale

Mobile World Investment
7.06%
Was (30-Jun-2021) 7.61%

Quarterly Data as of 30-Sep-2021

30-Sep-2021 - Johannes Loefstrand, Portfolio Manager ,

Over the course of the third quarter, we modestly reduced our exposure in Vietnam. We redeployed the proceeds into other markets, raising the size of our overweight to Kazakhstan, continuing to build on our exposure to the Baltic region, and identifying a new opportunity in Pakistan. As of end of the review period, the portfolio's main country relative overweight positions were in Vietnam, Kazakhstan, Pakistan, and Egypt while the main underweights were in Bahrain, Morocco, and Nigeria.

Kazakhstan

We made a number of changes to our holdings in Kazakhstan, raising the extent of our existing overweight to the country.

  • We initiated a position in Kaspi, the leading Kazakh fintech, which operates three main business lines: a payments platform, a marketplace platform and a fintech business focused on consumer lending. All three businesses have top market positions, and they are integrated into Kaspi's ecosystem, centered around the super app. We expect that the company's growth will continue to be driven by Kazakhstan's low financial penetration and readiness to adopt digital technologies, an accommodative regulatory backdrop and structural acceleration in digital payments and ecommerce due to the pandemic.
  • We reduced our position in Halyk Savings Bank of Kazakhstan, following strong performance. The company offers a diversified exposure to Kazakhstan's financial sector. We maintain a reasonable position in the stock but took the opportunity to diversify our allocation to the Kazakh financials space. We believe that Halyk offers a sustainable return on equity, a decent dividend yield and is attractively valued.

Vietnam

Vietnam remains the portfolio's largest country position on an absolute basis and one of our highest conviction markets. However, high valuations and coronavirus concerns led us to trim our exposure over the past six months. In our view the short-term risk-reward has become less attractive in the wake of the strong market performance in recent months. Long term, we believe the country offers a very attractive investment opportunity.

  • We reduced our holding in Vietnamese street level retailer Mobile World Investment, which specializes in mobile devices, consumer electronics and groceries. Following a strong run, we moderated the size of our holding in order to reduce concentration in the portfolio. The stock remains one of our highest conviction holdings. The company has moved into the grocery retail space, which remains very underdeveloped in Vietnam. We believe it has the potential to become the leading grocery retail format in the country over time.

Frontier Asia: Pakistan, Malaysia, and the Philippines

Beyond Vietnam, we made a number of adjustments to our holdings within Frontier Asia. We identified a new opportunity in Pakistan, continued building a position in a classifieds business based in Malaysia, and took profits in a telecommunications provider in the Philippines.

  • We bought a position in TRG Pakistan, the business process outsourcing company. This holding provides exposure to customer-focused support functions, digital marketing and customer care businesses, areas which are likely to benefit from increasing outsourcing. Furthermore, the company invests in the development of artificial intelligence technology, which should enable call centers to improve service levels, whilst increasing revenue and reducing costs.
  • Frontier Digital Ventures invests in developing online classifieds businesses in underdeveloped, countries or regions. We added to our holding; many of the company's businesses are nascent but cover a large population and have the potential for strong growth over the long-term. Although headquartered in Malaysia and listed in Australia, the company holds majority stakes in some attractive assets in Pakistan, Latin America, Morocco and parts of South East Asia.
  • We trimmed our position in Converge ICT Solutions, the Philippines fixed broadband provider, following outperformance. The company is the third largest broadband company in the Philippines and has been gaining market share. Broadband penetration in the Philippines remains low relative to other countries in the region and we expect that the pandemic will continue to impact demand for connectivity. The company ranks well in terms of affordability and customer service.

Frontier Europe: Slovenia and the Baltics

Within Frontier Europe, we made a number of switches to our existing positions. These included booking profits following strong share performance and building up an existing position following our participation in an IPO in the second quarter. In the case of the Baltics, we believe the economies in this region are well-placed to catch up with the rest of Europe and stand to benefit from the European Union's Recovery and Resilience Facility and other fiscal support measures. The region has also become a hub for start-up companies.

  • We cut back our holding in Nova Llubljanska Banka, Slovenia's dominant bank and financial group, which also operates in some neighboring countries in Southeastern Europe. This was partially due to profit-taking following strong outperformance. The bank's forecasted dividend yield has also declined, and we monitor the stock's liquidity carefully. That being said, we maintain a sizeable holding and expect the see improved earnings and return on equity following the acquisition of Serbia's Komercijalna Banka late last year.

Sectors

Total
Sectors
12
Largest Sector Financials 33.28% Was (30-Sep-2021) 32.21%
Other View complete Sector Diversification

Monthly Data as of 31-Oct-2021

Indicative Benchmark: MSCI Frontier Market 10/40 Index Net

Top Contributor^

Real Estate
Net Contribution 2.17%
Sector
1.26%
Selection 0.91%

Top Detractor^

Financials
Net Contribution -1.69%
Sector
-0.11%
Selection
-1.58%

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Information Technology
By17.73%
Fund 17.73%
Indicative Benchmark 0.00%

Largest Underweight

Materials
By-10.04%
Fund 0.10%
Indicative Benchmark 10.14%

Monthly Data as of 31-Oct-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 44.22% Was (30-Sep-2021) 46.75%
Other View complete Region Diversification

Monthly Data as of 31-Oct-2021

Indicative Benchmark: MSCI Frontier Market 10/40 Index Net

Top Contributor^

Pacific ex Japan
Net Contribution 3.26%
Region
-0.80%
Selection 4.06%

Top Detractor^

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

^Relative

Quarterly Data as of 30-Sep-2021

Largest Overweight

Pacific Ex Japan
By10.74%
Fund 44.22%
Indicative Benchmark 33.48%

Largest Underweight

Middle East & Africa
By-16.62%
Fund 20.83%
Indicative Benchmark 37.44%

Monthly Data as of 31-Oct-2021

Countries

Total
Countries
18
Largest Country Vietnam 30.79% Was (30-Sep-2021) 32.79%
Other View complete Country Diversification

Monthly Data as of 31-Oct-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
By7.89%
Fund 7.89%
Indicative Benchmark 0.00%

Largest Underweight

Bahrain
By-7.33%
Fund 0.00%
Indicative Benchmark 7.33%

Monthly Data as of 31-Oct-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.