‘Frontier Markets’ Rope In Investors
Off-the-Beaten-Path Arenas Attract Fund Managers Hoping to Ride Their Years of Rapid Growth
DAN KEELER
Updated Jan. 31, 2014 8:35 p.m. ET
Some investors are finding refuge from the recent emerging-markets turbulence in an unexpected place: even less-developed economies.
These “frontier markets” are luring money managers who are willing to delve into smaller markets with more difficult trading conditions in order to gain exposure to robust economic growth.
Because they are off the beaten path, frontier markets haven’t been swept up in the selloff that has pummeled emerging markets. Countries such as Nigeria, Pakistan and Bangladesh didn’t see much of the cash that poured into emerging markets after the financial crisis, when low-interest-rate policies in richer economies sent investors in search of better returns in the developing world.
Instead, frontier markets have seen a steady trickle of investment from fund managers hoping to ride years of rapid growth. As a result, these economies have come through relatively unscathed even as investors pull out of larger emerging markets such as Turkey and South Africa.
The MSCI Frontier Market Index is up 1.3% so far this year, compared with a 6.6% decline in the MSCI Emerging Market Index. Last year, frontier markets rose 16%, while emerging markets fell 12%.

Funds that buy frontier stocks in January drew in $244 million through Jan. 29, the most since October, according to EPFR Global. Over the same period, investors yanked $11.6 billion from emerging-market funds. Read more of this post
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