Throughout this paper we will use “Frontier Markets” as a general term to describe those markets in the least rich and developed economies. As shown in Appendix A, which countries are included within this classification depends on who is asked. However, regardless of exactly which set is adopted, these equity markets have tended to experience periods of strong returns with relatively low correlation to traditional asset classes. In this overview, we will discuss the equity investment opportunities offered by this asset class, the risks associated with an investment, and finally investment implementation.
In general, Frontier Markets offer strong growth opportunities and some diversification benefits, which can make an investment attractive to investors with a high target return who also seek diversification. The complexity, illiquidity, and other challenges indicate that an investment in this area will not be well suited to all investors. The risks and uncertainties associated with an investment in Frontier Markets are significant, but a modest allocation can make sense if the short to medium term risks are managed and monitored.