Investing in frontier markets: An introduction
Among the world’s developing economies, a few behemoths grab the headlines: India, China, Brazil or South Africa. Under the radar, there are a range of smaller markets that share many of the same high growth, dynamic characteristics, but remain largely undiscovered by investors. These are frontier markets.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Why now for frontier markets investing?
Frontier markets are often overlooked by investors and this has left valuations looking low relative to their global peers and their own history.2,3 These markets move independently from global stock markets and are therefore a good source of diversification for long-term investing at a time when markets are increasingly concentrated. Frontier markets can also introduce new sources of growth to a portfolio.
Low valuations - Frontier markets are often overlooked by global investors because they are small and difficult to research. This means pricing may be less efficient than in other markets.
Global trends - Frontier markets are on the right side of a number of global trends. For example, they may be beneficiaries of the relocation of supply chains away from China.
Reform momentum - As frontier economies grow, they may strengthen their institutions, bring in foreign investors and build new infrastructure. These reforms could unlock value over time.
Key drivers & risks for frontier markets
Frontier markets are diverse, with options for income investors, alongside those looking for growth or value. However, many of these countries are at an early stage in their economic development and global investors tend to pay attention to these smaller markets when global risk appetite is high and geopolitical tension is low.
Supply-chain re-engineering
Global supply chains are in flux. Geopolitical tensions and tariffs are prompting companies to relocate sources of supply to ensure they are reliable, efficient and well-priced. Companies are moving manufacturing away from China, for example. Frontier markets may be beneficiaries of the shift.4
Commodities
Frontier markets may hold supplies of key raw materials - nickel from Indonesia, or metals from Kazakhstan, for example. These are small economies and changes in commodities pricing can have a significant impact on domestic economic growth. This strength can fan out through the wider economy.
Global risk appetite
Frontier assets are illiquid and volatile, so they depend on global investor confidence. If investors are confident enough to take risk and look for new sources of growth, frontier markets may see inflows. They may struggle at times of weaker global confidence, particularly when interest rates are high.
Political stability and financial credibility
Frontier markets are more vulnerable to domestic political volatility and any damage to their fiscal credibility. They tend to have weaker governance, and less established legal systems. They may see more policy volatility, and this can have an impact on capital flows and local currencies.
Demographics
Frontier markets often have a stronger demographic profile, particularly across the African continent.5 They often have younger, more dynamic populations, which means they aren’t spending as much on health and retirement.6 This can help them grow faster than developed markets.
Market specific drivers
Frontier markets have significant weightings in financials, real estate and natural resources.1 Factors that influence these sectors – including raw materials prices, global interest rates and inflation – may have a disproportionate effect on frontier market returns.1
Major market indices
Frontier markets are diverse and tend to be driven by idiosyncratic factors. They are only lightly integrated into the global economy, and therefore operate independently from many developed markets, but also from each other. There are a number of frontier market indices, and indices for individual markets.
MSCI Frontier Markets Index – This index replicated the performance of large and mid cap companies listed across 28 frontier market countries. The index has over 200 companies, with its largest country weighting in Vietnam and sector weighting in financials.1
The VN-Index – this is the main stock market index for the Ho Chi Minh Stock Exchange, representing the largest companies. Other Vietnamese indices include the MSCI Vietnam Index and the S&P Vietnam Core Index.7
Casablanca CFG 25 – This is the main Moroccan market, and comprises the largest 25 companies listed on the Casablanca stock exchange. It represents over 80% of the market capitalisation of the exchange.8
When to invest in frontier markets
Frontier markets tend to have their own economic pattern, distinct from the rest of the world, and from each other. With this in mind, there may not be a specific time to invest in frontier markets as a whole, but only the right time to invest in individual markets. However, there are certain conditions that favour frontier markets.
When global liquidity is high
If interest rates are low in developed markets, global investors will be more willing to look to smaller and emerging markets for growth. Frontier markets can therefore be a beneficiary of stronger global liquidity and investor confidence.
When commodity prices are strong
Frontier markets are often commodity-rich and their economies benefit from high commodity prices. This can help support growth in the domestic economy. The global energy transition has been a particular support for a number of frontier economies, creating demand for specific commodities.9
At times of higher economic growth
Individual frontier markets are likely to do well when they are experiencing strong economic growth. Capital inflows support local currencies and encourage investment. Often this accompanies structural reforms, such as privatisation, improved governance or efforts to tackle corruption, which draws in foreign capital.
When global risk appetite is high
Frontier assets are illiquid and volatile, and tend to perform better when investor confidence is high and investors are comfortable taking risks in search of higher growth.
How to invest in frontier markets: Notable sectors and industries
Frontier markets are well-diversified across sectors and it is possible to find real pockets of innovation within them. Nevertheless, these are less developed countries, with smaller capital markets and certain types of companies are likely to list on the stock market before others. This means certain sectors tend to dominate.
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Financial companies comprise over a third of the MSCI Frontier Market index.1 Banks, in particular, are at the forefront of economic growth. They may be lending to help small businesses grow or encouraging financial inclusion. They are therefore an important part of frontier market investment. Examples include Bank Mandiri in Indonesia, Banca Transilvania in Romania or Attijariwafa bank in Morocco.
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A number of frontier and smaller emerging markets are heavily dependent on commodities for growth, including Nigeria and Kazakstan.10 Commodity companies may also be beneficiaries of economic development, including cement companies for building, for example. Large companies include OMV Petrom in Romania, or Hoa Phat Group in Vietnam.
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As a country grows and develops, real estate will often be at the forefront of development as businesses and families look for improving accommodation. Real estate is often an early area of investment in emerging economies. Examples include Emaar Properties in Dubai, or VinGroup in Vietnam (currently the largest company in the MSCI Frontier Market index).
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Frontier markets are home to a range of powerful domestic consumer companies that are benefiting from improving disposable income, strong demographics and financial inclusion.6 Examples include LPP Poland, a clothing company headquartered in Gdańsk, or CP All, a convenience store operator based in Thailand.
Historical performance of frontier markets
Frontier markets often perform independently from each other, and from global markets. By targeting different markets and blending them effectively, active frontier market funds will often look very different to the index, which can be influenced by short-term volatility in individual markets. More recently, frontier markets indices have largely tracked the performance of global emerging markets, with weak years in 2018 and 2022, while remaining robust in the intervening years.1
Annual performance to last quarter end (%) (GBP)
|
30/09/2024 |
30/09/2023 |
30/09/2022 |
30/09/2021 |
30/09/2020 |
|
|
Price |
21.44 |
5.36 |
17.68 |
8.69 |
36.88 |
|
NAV |
14.67 |
5.97 |
14.35 |
7.67 |
46.68 |
|
Sector Price+ |
32.79 |
6.75 |
6.91 |
-7.38 |
33.51 |
|
Sector NAV+ |
21.10 |
13.58 |
1.33 |
-8.13 |
29.07 |
|
Reference Index‡ |
10.22 |
5.29 |
-3.95 |
11.98 |
22.05 |
† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Our investment trusts
BlackRock Frontiers Investment trust
Targeting capital growth, the BlackRock Frontiers Investment Trust (BRFI) focuses on the world’s most dynamic countries, investing in a carefully curated selection of businesses in the economies of tomorrow.
Regional Hub FAQS: Frontiers
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Frontier markets are the world’s smallest investable markets. They sit below established emerging markets such as India or China, and include countries such as Vietnam, Indonesia, Turkey or Egypt. They can be found across the world, but their size and illiquidity mean they are often over-looked by investors.
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Frontier markets can bring a range of unique opportunities to a portfolio. These markets are often idiosyncratic, with their returns uncorrelated to global stockmarkets. This makes them a valuable source of diversification for investors. They are often at an early stage in their development, which gives them a strong pathway of growth. This creates a fertile environment for companies to grow. They are often under-researched by global investors, leaving undiscovered opportunities for active fund managers.
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Frontier markets contain a variety of sectors, with individual countries often having strength in particular areas. However, in early stage companies, certain types of companies tend to list first, notably financials, raw materials and real estate. These sectors are well-represented in frontier market indices.
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The BlackRock Frontiers Investment Trust targets long-term capital growth by focusing on the world’s most dynamic, smaller countries. It invests in a carefully curated selection of businesses in the economies of tomorrow, balancing a macroeconomic overlay with fundamental company analysis.
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Frontier assets can be illiquid and volatile. Individual markets are subject to political and economic disruption, and may have weaker governance and less established legal systems. Nevertheless, frontier markets often perform independently from each other and from global stock markets. Therefore, a portfolio of frontier markets may improve the risk/return balance of a portfolio. By targeting different markets and blending them effectively, it is possible to reduce risk.
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Frontier markets often perform independently from each other, and from global markets. They can therefore be a useful source of uncorrelated returns in a portfolio. Active frontier market funds will often look very different to the index. They tend to be overlooked by global investors, which means they may be a source of undiscovered opportunities.
Annual performance to last quarter end (%) (GBP)
|
30/09/2024 |
30/09/2023 |
30/09/2022 |
30/09/2021 |
30/09/2020 |
|
|
Price |
21.44 |
5.36 |
17.68 |
8.69 |
36.88 |
|
NAV |
14.67 |
5.97 |
14.35 |
7.67 |
46.68 |
|
Sector Price+ |
32.79 |
6.75 |
6.91 |
-7.38 |
33.51 |
|
Sector NAV+ |
21.10 |
13.58 |
1.33 |
-8.13 |
29.07 |
|
Reference Index‡ |
10.22 |
5.29 |
-3.95 |
11.98 |
22.05 |
† Morningstar IT Global Emerging Markets
‡ MSCI Frontier + Emerging Markets ex Selected Countries Index
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Our range
Source:
1 MSCI - MSCI Frontier Markets index - 30 September 2025
2Trust Intelligence - Exploring frontier and emerging markets amid shifting global flows - 15 October 2025
3 MSCI - MSCI Frontier Markets - 31 October 2025
4 Economist.com - Navigating a fractured world - November 2024,
5 S&P Global - How we rate emerging frontier markets - 24 February 2025
6 Trust Intelligence - Exploring frontier and emerging markets amid shifting global flows - 15 October 2025
7 Trading Economics - VN-Index - 31 October 2025
8 Trading Economics - Casablanca CFG 25 - 31 October 2025
9 Global Witness - The critical minerals scramble - 20 March 2025
10 UN Trade & Development - Commodity dependence runs deep. Developing countries must add value to turn the tide - 21 July 2025
Risk Warnings
Investors should refer to the prospectus or offering documentation for the funds full list of risks.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time and depend on personal individual circumstances.
Fund-specific risks
BlackRock Frontiers Investment Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Frontier Markets, Gearing Risk
Description of Fund Risks
Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.
Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.
Frontier Markets: Frontier markets are generally more sensitive to economic and political conditions than developed and emerging markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund. There may be larger fluctuations to the value of your investment and increased risk of losing your capital.
Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
