BGF Emerging Markets A2 |
by Samuel Lo
We remain confident in the BlackRock Emerging Markets strategy. While the team instability and reduction in analytical resource over the past year bear close monitoring, we continue to have conviction in lead manager Gordon Fraser, who has achieved outstanding results by consistently executing this flexible investment strategy. The Luxembourg-domiciled BGF Emerging Markets Fund retains a Morningstar Medalist Rating of Bronze on its clean D2 share class, while the ratings for the other share classes continue to range from Silver to Neutral, depending on fees. The rating for the UK-domiciled BlackRock Emerging Markets Fund remains at Bronze across all share classes, including the clean D share class. Fraser took over this strategy in March 2017. He started his career with BlackRock in 2006 and began managing money in 2011 as a comanager with the successful BlackRock Emerging Frontiers. Fraser is a savvy and passionate investor and has consistently demonstrated sound top-down and bottom-up insights, notably when it comes to macro analysis. The supporting Global Emerging Markets equity team has continued to experience high turnover in recent years. In particular, there were eight departures since our last review, and the team shrank to 35 from 42 a year ago. Fraser has a strong track record of adding value via country positioning and we remain confident in him. Nonetheless, we would like to see the team stabilize as it is core to generating stock ideas for the portfolio. Fraser executes a style-agnostic approach by blending top-down and bottom-up research, with the goal to outperform across market environments. Not only has Fraser adhered to the approach across market environments, but he has also consistently demonstrated solid acumen while leveraging BlackRock’s full suite of quantitative tools and analytical resources. That said, making correct macro calls consistently remains an inherently difficult exercise, given the complex interplay between stylistic trends, diverse economic conditions, and geopolitical risks, as typified by the setback it faced in Russia in 2022. The strategy’s size has grown to USD 9.5 billion as of March 2023 from USD 2.3 billion three years ago, on the back of continued net inflows. We continue to keep a close eye on capacity, although we do not have immediate capacity concerns as Fraser continued to steer the portfolio nimbly and the portfolio’s liquidity profile has remained strong. Fraser has delivered solid results over his tenure. Between April 2017 through April 2022, the strategy beat the MSCI Emerging Markets Index by more than 100 basis points per annum and ranked in the top quintile among peers. The strategy has been more volatile than the benchmark, in part owing to its flexible approach. Nonetheless, investors remain well-rewarded on a risk-adjusted basis over the long run and the strategy remains an appealing proposition. |
Morningstar Pillars | |
People | Above Average |
Parent | Above Average |
Process | Above Average |
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