Of course, it’s the younger generation that forms new households, creates families, and drives consumer sector growth. An active manager can emphasize countries with emerging consumer economies such as Nigeria and Uganda. In comparison, a frontier index fund may be heavily weighted toward more mature economies such as Kuwait, the United Arab Emirates, Qatar and even Saudi Arabia (in some classifications).
In summary, we believe the smartest way to invest in the frontier is to take a long-term perspective and focus on well-managed companies trading at attractive valuations. Our portfolio concentrates on about 30-40 companies, and we look for opportunities to identify businesses trading below intrinsic value. We are very comfortable with the valuations of our leading companies, some of which are not covered by any Wall Street analysts. Indeed, the frontier markets are much less “efficient” than developed or emerging markets.
We believe frontier market knowledge and in-depth research gives active managers an edge in these markets, relative to a passive indexed approach.
Larry Seruma is the Managing Principal of Nile Capital Management LLC, a Princeton, N.J.-based investment management firm. He is the firm’s Chief Investment Officer and serves as Portfolio Manager for Nile Funds, an active manager that invests in stocks of leading public companies in Africa and across frontier markets globally.
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