BRFI has been on a multi-year run of outperformance of the mainstream EM indices…by Thomas McMahon



BlackRock Frontiers (BRFI) invests across the emerging and frontier markets, excluding the largest eight countries which dominate the typical emerging markets portfolio. This has been a fruitful place to invest since early 2021, with BRFI delivering strong gains in both 2021 and 2022 (see Performance), while globally, markets have struggled. It has also performed well in 2023 so far.

The unique investment universe is designed to offer exposure to countries with high GDP growth and whose markets often have low correlations to the mainstream indices. Additionally, investors are supporting economic development in some of the world’s poorer countries.

The portfolio is managed by Sam Vecht, Emily Fletcher, and Sudaif Niaz; Sudaif having joined the management team in February 2023. They argue their universe contains many countries benefitting from the de-globalisation trend which is seeing US and Chinese companies looking for third parties with whom to trade. Indonesia, the largest country exposure, is a case in point (see Portfolio). Additionally, they point out that fiscal and monetary discipline in many of their countries means rate cuts look likely to be seen in the near future.

Even after a strong two years of performance, BRFI’s portfolio still trades at a significant discount to global equity indices. Meanwhile, BRFI’s share price rating still offers potential value, with the shares on a 5.7% discount to NAV at the time of writing.

Strong operational performance by companies in the portfolio has seen a surge in revenue return per share in the 2023 financial year so far. This has allowed the board to announce a much higher interim Dividend. While BRFI does not have an income objective, it continues to offer an attractive yield, that being 4% on a historic basis at the time of writing.

Analyst’s View

One of the key selling points of BRFI is the low correlation of its countries of investment to the mainstream indices and each other. We think this has really come through over the past two years, with BRFI producing attractive returns in two of the most difficult years for mainstream developed and emerging market indices in recent memory.

BRFI’s unique investment universe means it offers a highly differentiated proposition which we think could reasonably be held alongside a typical emerging markets fund or a tracker, or could be held on its own.

Why would an investor want to do that? Well, there are huge question marks around the wisdom of investing in China at the moment, with the threat of further US sanctions to consider alongside the quixotic behaviour of the domestic authorities. This might make taking emerging markets exposure without China attractive.

In any case, the MSCI EM index is heavily tilted towards technology and North Asian companies plugged into the global economy. Indeed, South Korea and Taiwan, two key exposures, have higher GDP per capita than Spain.

This means the index increasingly offers something very different to what it used to. BRFI, by contrast, offers exposure to countries seeing rapid GDP growth and experiencing development from a rapid base, with the spread of basic industries and demographics providing endogenous drivers behind earnings growth. This looks like an attractive long-term investment to us, particularly when considering it can be accessed at a 5.7% discount.



  • Offers diversification benefits from exposure to niche markets
  • Smaller emerging and frontier markets are relatively cheap and have substantial growth potential
  • Trading at a substantial discount versus recent history




  • Potential for sharp sell-offs in systemic global crises
  • If global inflation pressures abate and growth style resumes market leadership, BRFI could underperform
  • Political risks are high in many of the universe’s key countries

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This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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