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LONDON (Alliance News) - BlackRock Frontiers Investment Trust PLC on Tuesday reported a rise in net assets for the financial year ended in September but underperformed its new benchmark with Argentina and Greek banks weighing heavily on its portfolio.
At September 30, BlackRock Frontiers' net asset value per share stood at 177.70 US cents compared to 196.91 cents the year before, a 9.8% drop. In sterling terms, the trust's NAV per share decreased 6.2% in the period to 139.75p from 149.0p.
BlackRock Frontiers' net assets increased 1.8%, however, to USD356.5 million from USD350.2 million last year. In sterling terms, net assets increased 4.8% to GBP273.4 million from GBP261.0 million.
The fund noted 22.7 million new shares were issued during the period.
BlackRock Frontiers' declared a total dividend of 8.4 cents per share, up 22% from the 6.9 cents paid out last year. The fund's total dividend includes a special dividend of 1.0 cents. BlackRock Frontiers did not pay a special dividend last year.
In dollar terms, the fund's NAV per share total return, which includes dividends, was negative 6.6%.
In April, BlackRock Frontiers changed its benchmark to MSCI Emerging Markets Index ex selected countries plus the MSCI Frontier Markets Index plus the MSCI Saudi Arabia Index - aptly described as "Frontiers Universe" - which had a total return of 2.3%. The fund's previous benchmark, the MSCI Frontier Markets Index, lost 7.7% in the period.
BlackRock Frontiers said the change - which excludes Brazil, China, India, Korea, Mexico, Russia, South Africa and Taiwan - "shares many characteristics" with its "historically defined frontier markets".
The biggest detractor for the fund's portfolio was Argentina, whose stock exchange lost 46% during the period. BlackRock Frontiers said its re-invested in the country following the Argentinian central bank approaching the International Monetary Fund for a USD50 billion loan. The fund said its additions were "too early" as the market continued to fall through the summer.
The fund's position in Greek banks "performed poorly" in the period. BlackRock said investors were concerned about an "escalation of the tensions post elections in Italy spilling over into the wider Eurozone".
Making a positive contribution was Kazakh bank Halyk Bank which "rallied" following the takeover over of its competitor Kazkommertsbank. The fund said its remains a shareholder in the bank "given its strong market position and competitive advantage in terms of cost of funding versus peers".
Colombian oil producer Ecopetrol, which gained 50% in the period, was one the fund's top performers. The increase in oil price and Ecopetrol's stable production were attributed for the sharp rise.
The best performing country was Vietnam, which was supported by "strong" net foreign direct investment. BlackRock Frontiers portfolio benefited from its holding in Vietnamese stockbroker Saigon Securities - whose value jumped 70% in the period.
The fund's co-investment manager Sam Vecht said: "We continue to be positive on the 'Frontiers Universe', especially where those markets are experiencing improved macroeconomic conditions, better political governance, cash flow growth, and cheap valuations."
"Emerging and frontier markets have de-rated considerably. Whilst further rises in US rates would likely put pressure on some emerging market central banks to mirror these increases, we believe that, in general, emerging markets are better positioned to weather this strain than they were in the previous periods of monetary tightening of 2013 and 2015," said co-investment manager Emily Fletcher.
Shares in BlackRock Frontiers were up 0.3% Tuesday at 142.20 pence each.