13 Questions for BlackRock's Sam Vecht and Emily Fletcher – Morningstar

Get 14 Days Free

neon question mark
In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they’d never buy.
This week our interviewees are Sam Vecht and Emily Fletcher, co-managers of the 3-star BlackRock Frontiers Investment Trust (BRFI).
The macro environment in 2022 is a tricky one for risk assets. We prefer to think in terms of stocks rather than sectors, but generally speaking, we like rate-sensitives and defensives which are relatively insulated from inflation pressures. Even after the strong performance year to date, we continue to find some interesting opportunities in the energy sector, reflecting the industry wide capex discipline we have seen over the past few years.
We continue to worry about the path of inflation and the likelihood of a global growth shock. Markets (and policymakers) still seem to operate under the assumption that inflation will eventually “normalise” to the low single-digit levels we have grown used to over the last couple decades. Our view is that no one quite knows that the new “normal” level will be. Developed markets, in particular, have seen more than two years of excess money creation which is only just starting to drain from the system. Unlike many emerging and frontier markets, developed countries have no real experience operating under such high inflation prints and the adjustment through a period of persistent high inflation is likely to be a painful one.
The core investment philosophy is that the combination of a diverse team, a flexible investment style, and a robust risk management process can deliver superior returns. We believe a disciplined approach to macro allocation, combined with in-depth fundamental stock research can deliver alpha to investors.
This belief is based on our view that frontier and emerging markets are heterogeneous, inefficient, complex and cyclical which creates a fertile ground for active investing. By considering the cyclicality of the equity markets, the team looks for investment opportunities beyond the latest themes and trends. We aim to capitalise on these market inefficiencies by seeking to identify inflection points in macroeconomic and political cycles to help guide country allocation decisions, overlaying these country allocations with compelling fundamentally driven stock ideas which we believe can beat market expectations.
Anyone who has survived a 15-year bear market. 
We don’t believe in forever stocks. In fact, in our universe, getting overly attached to a stock is possibly a fund manager’s biggest pitfall. There are many stock stories we like but are still happy to trim or exit when valuations get ahead of fundamentals. In a normal year 80% of stocks within emerging markets move 40%, so the market is always giving us opportunities.  Understanding the relative strengths and weaknesses of a company’s business model allows you to take advantages of the market dislocations which we frequently see in emerging markets.
We only invest in equities that have fully audited accounts and trade every day on a standard exchange. Within that realm, nothing is out of bounds. We believe everything has a value.
Sam Vecht: Value – there’s no such thing as growth independent of price.
Emily Fletcher: Growth – frontier markets should benefit from growth convergence.
If you have ever met us, you would agree that neither of us have any style!
Both, don’t put all your eggs in one basket, portfolios should be deliberate, diversified and scaled.
While we believe the underlying blockchain technology has the potential to transform many industries, we view crypto as a high-risk asset. 
It has to start from the ground up. We need to make a conscious effort to recruit diverse junior talent which goes beyond just gender. We need diversity of geography, education, socioeconomic background, interests, and way of thinking. Across our Fundamental Equity platform we run an Investing in Investors programme which aims to train and develop investors from more diverse backgrounds and experiences. While we have made good progress over the last few years, we recognise that there is still a lot of work to be done.
Engagement in this part of the world is a long and iterative journey. We have to be cognisant that the starting point of many of our companies and countries is very different from what we see in Europe for instance, and so outcomes will take longer to be realised. As investors who understand these companies and their business models deeply, we recognise that a one-size-fits-all approach does not work and try to give them actionable recommendations.
One interesting engagement example is with a company in Latin America which was quite poorly rated by an external rating agency but upon speaking with management, we learnt that it was largely a function of the agency not taking into account their latest data and disclosure. It reinforced the drawbacks of a singular reliance on ratings and the need for substantive research to truly understand ESG considerations.
Sam Vecht: Work hard, read lots, be patient, support Spurs.
Emily Fletcher: All of the above except that last part, I am a Chelsea supporter!
Sam Vecht: Playing for Spurs, any position will do.
Emily Fletcher: Sailing around the world, visiting new countries is one of the best bits of the job.
Subscribe Here
The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person’s sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

In this series, we ask leading fund managers about everything from their investment strategy, …

In this series, we ask leading fund managers about everything from their investment strategy, …

In this series, we ask leading fund managers about everything from their investment strategy, …
We’re back with another roster of fund rating changes
Huge changes to the ESG landscape are putting asset managers under pressure to define their ESG o…
Mining companies are operating in a challenging environment but could now be the time to top up o…
THE WEEK: Morningstar columnist Rodney Hobson provides two pieces of advice to George Osborne, an…
Businesses that have competitive advantages within their industry are good candidates for dividen…
Morningstar reveals the top 10 best performers over the last five years
Morningstar OBSR reveals the top funds for investors seeking exposure to European equities
Huge changes to the ESG landscape are putting asset managers under pressure to define their ESG o…
VIDEO: A common saving rule is the 50-30-20 rule, with some money allocated towards the fun thing…
We’re back with another roster of fund rating changes
It’s almost a year since the Evergrande crisis unfolded. How have managers changed their allocati…
The earnings loss is a distraction, and we think the stock is undervalued right now  
Marina Gerner  is a freelance journalist
About Us
Connect With Us
Get Help
Terms of Use        Privacy Policy        Modern Slavery Statement        Cookie Settings
The Morningstar Star Rating for Stocks is assigned based on an analyst’s estimate of a stocks fair value. It is projection/opinion and not a statement of fact. Morningstar assigns star ratings based on an analyst’s estimate of a stock’s fair value. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process culminates in a single-point star rating that is updated daily. A 5-star represents a belief that the stock is a good value at its current price; a 1-star stock isn’t. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Morningstar Star Rating for Stocks, please visit here
Quantitative Fair Value Estimate represents Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. The Quantitative Fair Value Estimate is based on a statistical model derived from the Fair Value Estimate Morningstar’s equity analysts assign to companies which includes a financial forecast of the company. The Quantitative Fair Value Estimate is calculated daily. It is a projection/opinion and not a statement of fact. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Quantiative Fair Value Estimate, please visit here


Leave a Comment