Investing on the Frontier
3 Jul 2014
Investors like to believe in a world of opportunities, but lately much of the world and those opportunities lack appeal.
Most of the developed world continue to struggle under the weight of high public and private debt loads, dysfunctional political systems and serious demographic challenges. Moreover, many emerging markets are in the midst of painful reforms to wean their economies off excess credit availability and export dependencies.
For investors seeking growth in their portfolio, one region has been gaining increasing attention in recent years: Frontier Markets.
Investing in frontier markets comes with risks resulting from the more limited market capitalisation and liquidity. However, given:
- The low correlations to developed and emerging markets
- The prospects for more sustained economic growth
- Better demographics
- A diverse underlying set of country exposures
we think growth-oriented, risk-tolerant investors should consider frontier markets as part of their strategic asset allocation.
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