Speaking with InvestorDaily, AFM managing director John Donovan said frontier markets have strong growth characteristics and have performed well in recent down markets.
“If you look at some of the so-called developed markets, they have had a bit of a rough trot in terms of performance and the economies, in contrast to some of the emerging markets, which have been going very, very well,” Mr Donovan said.
“It’s always a good time to diversify for an institution because they are by definition long-term investors.
“They know there is a bit of volatility, but essentially the frontier market countries are showing strong growth characteristics.”
AFM’s investment management partner Advance Emerging Capital has been investing in frontier markets for almost two decades – with strong results, according to the group.
Advance Emerging Capital chief executive and chief investment officer Slim Feriani said frontier markets have been the best performing equity asset class in the year to date.
“Some frontier market countries show the strong growth characteristic that have been seen in emerging market countries,” Dr Feriani said.
“Frontier markets hold two distinct advantages: higher dividend yield and less volatility.
“With faster economic growth and earnings performance [outpacing] many emerging economies, frontier markets demonstrate excellent investment opportunities in 2013 and beyond.”
Mr Donovan said that while frontier market investing is not a commonly used strategy, interest in the asset class is increasing.
“It’s used by some of the early movers and innovative-type investors, but like a lot of things in Australia, over time people will become more comfortable with it,” Mr Donovan said.
“People are thinking about it and this interest will continue because of diversification. Frontiers can provide some diversification and spice.”
