Aberdeen Frontier Markets throws in the towel – having failed to beat its benchmark over the two years ended 30 June 2020, the board intends to fulfill the promise it made in October 2018. Shareholders were to be offered a cash exit at NAV but “following careful consideration of the amended discount control policy, the requirement to offer shareholders a cash exit, the prospects for frontier markets and the current size and operational costs of the company, the board believe that it is in the best interests of the company and its shareholders to… commence an orderly winding-up of the company.”
“Having taken into consideration the costs of providing any possible rollover option and indications received from shareholders representing a large number of the company’s ordinary shares seeking cash, the board has concluded that the possible value of net assets that might seek such a rollover would be insufficient to make this a viable option.”
[We have followed this company since launch. While it was run as a fund of funds it did moderately well and we liked the direction it was going in. However, some investors moaned about the double layer of fees and the mandate was amended to one of direct investment and the manager changed. Some stock selection mistakes were made but, in our view, the principal reason why this fund failed was that the manager did not factor in the enormous fund flows that distort returns in thinly capitalised markets – failing repeatedly to capture the upside as capital flooded into frontier markets that were upgraded to emerging market status. This cost the fund dearly.
Frontier markets represent some of the most dynamic and exciting investment opportunities. Investors can still access these through BlackRock Frontier Markets and to a lesser extent through Jupiter Emerging and Frontier Markets and Mobius Investment Trust.
There is no plan for a rollover option. The three funds we mentioned are all trading on narrow discounts. We hope that the Aberdeen Frontier Markets board considers offering a rollover into one of these funds.]
AFMC : Aberdeen Frontier Markets throws in the towel