The world’s least-developed markets are starting to win investors’ love.
Frontier equity markets are luring more money from investors as their growth prospects outweigh their market sizes and lack of liquidity, according to David S. Grayson, co-founder of New York-based stockbroking company Auerbach Grayson & Co. LLC.
Fewer links to international capital markets has also shielded them from any global pullbacks, helping growth of their combined market value, which exceeded $700 billion for the first time in a decade in January. Assets managed by dedicated frontier-equity funds have more than doubled since 2010 to $18.5 billion at the end of 2017, according to data compiled by EPFR Global.
“It’s like a new asset class,” Grayson, whose company specializes in emerging and frontier markets, said in an interview in Singapore. “What we’re seeing also in the last five years is you have traditional fund managers who never got involved in frontier markets who’d started frontier funds as part of their family of funds because their clients have come to them and say we want exposure.”
Below are some of Grayson’s views he shared at the interview:
What are the risks and rewards for investing in them?
People are willing to take that risk and put a tiny bit of their portfolio to work in some of the frontier markets. Frontier markets are seen overall to have much more growth than developed markets, Grayson said Low-income developing nations will expand at more than double the pace of advanced economies in the coming years, according to forecasts by the International Monetary Fund released last month:
2019 2018 2017
World Output 3.9% 3.9% 3.7%
Advanced Economies 2.2% 2.3% 2.3%