According to data from FE Analytics, it has more than doubled in size since January 2012 – growing by 156 per cent – and the fund house has decided to soft-close it next month.
The fund is by far the best-known of the portfolios in the frontier markets space, and one of very few out there, making it hard to find a decent alternative.
While the sector has long been seen as a luxury to be added to by portfolios that are already well-diversified, the size of inflows to Mobius’s fund reflects growing interest in the story.
Returns from funds investing in the MSCI Emerging Markets index have been weak over the past few years, while the frontier markets have gone on a surge.
Over three years, the MSCI Frontier Index now leads its better-known companion, thanks to a meteoric rise over 12 months.
Data from FE Analytics shows that over three years, the frontier markets have made 25.79 per cent while the emerging markets have made 23.99 per cent.
Over one year the difference is even starker, with the frontier markets making 27.33 per cent against the emerging markets' 14.8 per cent.
Performance of indices over 3yrs
Source: FE Analytics
One alternative for investors to consider in the space is the £102m BlackRock Frontiers IT, managed by Sam Vecht.
The trust has risen 40.11 per cent over the past year, according to AIC data, while the NAV has risen by 35.32 per cent.
This means it has outperformed both its benchmark and the soft-closing Templeton fund.
Performance of funds vs index over 1yr
Source: FE Analytics
Vecht says that part of the reason why frontier markets are doing so well is they offer decent yields.
"Record low bond yields are forcing investors to widen their search for yield. In this context, frontier markets stand out for their high dividend yields, often in US-pegged currencies with healthy growth prospects," he said. Describing the first quarter of this year – to 31 March – Vecht said that his positions in Nigeria and the UAE have made a significant contribution to the trust’s outperformance.
"Frontier countries noted for their strong performance during the period included The United Arab Emirates, which was up by 40 per cent as the equity market finally caught up with the buoyant economy and improving real estate market; and Nigeria, which was up by 35 per cent as investors flooded into the market."
Both markets have made more than 80 per cent over the past 12 months, according to data from FE Analytics.
Performance of indices over 1yr
Source: FE Analytics
"Two sectors performed especially well in Nigeria; the banking sector, which has rallied off low valuations as system-wide reform was evidenced; and the consumer sector, where investors became increasingly excited about the potential future growth in a country with a population of around 200 million people," Vecht said.
"The strongest individual contributor to relative performance was UAE hospital operator, NMC Health."
"The company saw its share price rise by almost 90 per cent after the company announced increased profits for 2012 and plans to expand capacity."
"Also contributing to relative performance was casino operator Nagacorp. The shares performed well on account of Cambodia’s strong tourism flows and in anticipation of strong 2012 earnings."
Nigeria remains the country most favoured by Vecht, who has 14 per cent of the portfolio in the nation.
The manager holds 12.2 per cent in Qatar and 11 per cent in the UAE, with a further 9.3 per cent in Saudi Arabia, making the portfolio tilted to the Middle East.
The trust also has positions in Kazakhstan, Vietnam, Sri Lanka and Croatia among others, making it highly diversified geographically.
Many investors are wary of taking on the extra risk associated with frontier markets, but Vecht says the fears are overplayed, with too much risk priced in.
"Most definitely frontier markets are not without risk, however. The key question is which of those risks is already priced in by the market?" he said.
"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."
Strong demand for the shares of the fund saw it trading on a premium of close to 8 per cent in April, although in the current more volatile market this has slipped back close to par.
In response to this strong demand, the board has announced it is considering issuing "C" shares to satisfy new investors without diluting the holdings of existing investors.
Typically, funds raised through a C-share issue are invested slowly by management and at a certain date become equivalent to ordinary shares.
Audley Twiston-Davies, chairman of BlackRock Frontiers Investment Trust, says that investors should expect a further announcement in the coming weeks.
Vecht says he is confident that the recent outperformance of frontier markets is not a flash-in-the-pan.
"We believe that frontier markets represent a compelling opportunity for long-term investors and, as we have stated previously, we believe that the outperformance of frontier markets over more traditional emerging markets will continue in 2013," he said.
"Historically, buying inexpensive equities in fast-growing countries, with undervalued currencies, is a sensible strategy for capital appreciation."
The trust has a performance fee, which makes it expensive: inclusive of the fee, charges were 2.14 per cent last year.
This compares favourably to the Templeton fund, however, which has ongoing charges of 2.57 per cent.
BlackRock Frontiers Investment Trust is currently 2 per cent geared.
