BlackRock, the world’s largest asset manager, will close iShares Frontier, a $400 million ETF that invests in frontier and select emerging markets equities, including Nigeria and Kenya.
The exit marks the continued flight of foreign investors from local bourses, blamed on a tough macroeconomic environment that has seen firms downsize, and the weakening of local currencies like the naira.
“The Board of Directors of the Company approved a proposal to liquidate the fund. In light of persistent liquidity challenges in certain frontier markets, including among other things, delays or limits on repatriation of local currency, the board determined that it is in the best interest of the fund and its shareholder for the fund to liquidate,” iShares said in a statement.
The fund will enter an extended liquidation period and expects the last day of trading to be March 31, 2025. During the period, iShares will sell its assets in all markets and hold the proceeds in cash and cash equivalents.
“Currency conversions, including conversion of Nigeria’s currency, the naira, will impact the timing of the fund’s liquidation. As a result, the fund will enter into an extended liquidation period,” iShare said.
“After market close no earlier than August 12, 2024, but on a date as soon as practicable, the fund will cease trading and the creation and redemption of creation units.”
African equities have lost their allure to foreign investors, dampened by low returns compared to other asset classes and currency scarcity in key markets like Egypt, Nigeria, and Kenya.
BlackRock’s iShares has already liquidated its holdings in companies listed on the Nairobi Securities Exchange (NSE). The fund had a $5.2 million investment in Kenya, including Safaricom ($2.8 million), Equity Group ($1.5 million) and KCB Group ($885,000).
The fund has been providing exposure to equities in select African bourses, such as Egypt, Kenya, Morocco, and Nigeria. Other markets are Bahrain, Bangladesh, Colombia, Estonia, Jordan, Kazakhstan, Pakistan, Philippines, Romania, Sri Lanka, and Vietnam.
