InvestmentsMay 30 2013

BlackRock Frontiers trust considers C-share issue

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Sam Vecht’s BlackRock Frontiers investment trust is looking to issue C-shares in the belief that frontier markets stand out as a source of high dividend yields.

The £130.6m trust’s net asset value has risen by 22.4 per cent in the past six months, compared to 18.6 per cent for the benchmark MSCI Frontiers Markets index, the company said.

Mr Vecht said record low bond yields had forced investors to widen their search for yield and that frontier markets proved a good opportunity.

“Most definitely frontier markets are not without risk, however,” he said.

“The key question is which of those risks is already priced in by the market? We would continue to argue that too much risk is priced into the equities of many frontier markets.

“Emerging market returns have been muted so far this year, due to weaker than expected corporate results across some of the major markets and increased issuance, especially in Asia, which has absorbed much liquidity.

In contrast to emerging markets, corporate results across frontier markets have surprised positively thus far and there has been minimal stock issuance.”

Chairman Audley Twiston-Davies said the board is “considering increasing the company’s capital base through an issue of C-shares to meet demand from new and existing investors while avoiding any dilution for existing shareholders.”

“Frontier markets continue to stand out for their low valuations and high dividend yields,” Mr Twiston-Davies said.