The maturing of emerging markets equities as an asset class in recent years has left some investors wondering what the next big investment opportunity will be. As a result, many investors have turned their attention to relatively untapped markets like Myanmar or Mozambique that have abundant natural resources and prospects for rapid economic growth. While the expansion of frontier-market economies offers the potential for opportunities in the areas of infrastructure development, commodities, financial services, telecommunications and consumer products, investing in these smaller, less efficient markets also involves a number of challenges and risks. The total market capitalization of the universe is also quite small, adding to the difficulty of investing in the frontier markets as a separate, dedicated asset class.
Capital Guardian has a long history of uncovering opportunities in developing economies and continues to devote substantial time and effort into researching all markets at their earliest stages of development. Investing in budding debt markets is an effective way to gain broader access to opportunities in the frontier markets. Managers also invest directly in frontier-market equities, as well as developed and emerging markets stocks that have significant exposure to frontier-market economies.
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