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Frontier markets have generally had a poor couple of years. I'd like to invest but it is actually fairly difficult to get information without using premium services none of which I subscribe to. Does anyone have some suggestions for frontier market (not "emerging markets", but the category below that.... frontier) funds that are open to new investors?
I am a fairly aggressive investor, but I have yet to see any evidence that owning a position in Frontier Markets is an essential and beneficial part of a diversified global portfolio. Personally, we own SIGIX and PXH in the EM equity space, and I consider that to be more than adequate.
Here is an informative M* article that you may find helpful:
I own MEASX and WAFMX and I've been very happy with the Matthews funds and not so happy with the Wasatch fund but that's certainly influenced by performance. Harding Loevner has a fund, HLMOX, that's done pretty well and may be more accessible than the Morgan Stanley fund, at least it is for me. You might want to keep an eye open for what Laura Geritz does with her new funds as they come together but I'm somewhat skeptical that she'll create a pure frontier markets fund again.
Ashmore Emerging Markets Frontier Equity fund (EFEIX) and Driehaus Frontier Emerging Markets Fund (DRFRX). Small, nimble managers which is important in this space so as to not move markets. Ashmore has a long history in the space and I think $1 minimum at Schwab. Driehaus is a very solid shop. Not as long a track record in Frotnier but a proven model for picking stocks. Minimum may be very high though to get into that fund.
Agree with @kevindow. I made some dough when the MS fund open-ended in 2012 and for a while thereafter, but sold in 2013. I'm also aggressive, but I don't see frontier markets as a place that will improve my EM or international returns.
EFEIX shows a concentrated portfolio of just 47 stocks, and 7 "other." I compared it to TRAMX: 71 stocks, 2 bonds and 1 "other." EFEIX shows a better 1 and 3-year record, but TRAMX has a longer record, showing 5 yr. perf. at 7.23%. It seems to me that it's not worth the headache of all of the deep research you'd have to do, in order to justify owning a Frontier fund. Expense Ratios are high. If you want to buy it as a short-term trade rather than a long-term investment, it might make you happy. I made money with TRAMX years ago, but it was dumb luck.
For a short term position, cost is secondary to market movement. Frontier market ETFs don't seem to offer an advantage aside from cost over OEFs. Meanwhile they have the usual bid/ask cost mitigating or perhaps dominating the ST management cost difference.
While the ETF options are more attractively priced, these index funds do face certain challenges in frontier markets, which is a relatively illiquid asset class. For example, when executing an index change, an ETF portfolio manager might face front-running and/or large market-impact costs. Turnover related to index changes could also result in capital gains distributions, as most frontier markets do not allow for in-kind creations and redemptions (the mechanism that allows ETFs to remove securities from their portfolio without incurring capital gains).
There is only one diversified "frontier" market ETF with more than 1/3 of its assets in frontier markets. FM. If one is recommending an ETF for this market segment, that shouldn't have been so hard to name.
ETF.com rates this the best frontier market ETF. That said, it also says that it is not particularly representative of this market segment, with a "poor tracking mean[ing] that realized holding costs are even higher." Overall, it rates FM an 'F' on a scale of A-F.
Why again are ETFs good in this market segment for ST trading? Again quoting ETF.com: "All three [ETFs in the market segment] trade poorly. FM sees the best volume most days, but it still won't be cheap to buy and sell." That may be excusable for a LT position, but is detrimental to use in ST trading.
I'm with Kevin on this one - if you get entertainment value out of these funds, that's fine. Otherwise it's a lot of research work for something that will not make a noticeable impact on your portfolio.
"if you get entertainment value out of these funds, that's fine. Otherwise it's a lot of research work for something that will not make a noticeable impact on your portfolio."
"if you get entertainment value out of these funds, that's fine. Otherwise it's a lot of research work for something that will not make a noticeable impact on your portfolio."
mfs, the most profane one liner I've read here in a long time. Actually goes for many other "specialized" funds-sectors I believe.
This sub-asset class is one to consider as an add-on to an existing EM position. Understand it probably carries more volatility and risk than any other. And the generally very high expenses should be considered in the risk/cost/reward evaluation. Then consider if you are getting real active management. HSBC's fund, for example, has expenses of 2.2% but only an 8% turnover. Driehaus has higher expenses with 19% turnover. Turnover does not necessarily relate to performance here, but you have to wonder what some of these funds are doing that results in such high expenses. A lot has to do with asset size. Morgan Stanley, Harding, and Wasatch have some size (still much less than $1 billion), but most are pretty small. And if you pick a fund that has boots on the ground to verify the companies it owns, that is bound to have an impact of fees. Personally, I am not sure I would want to own a fund that does not verify aspects of a company it owns. And the management better have a lot of their own dollars in the fund they own, or I would cross them off the list. In the end, I am not sure this sub-asset class warrants much attention, unless the investor has money they can afford to lose or unless they have really good market timing in this area.
Reviving an old thread since the comments here are still on point. I was looking for a replacement for WAFMX, having been disenchanted since Laura Geritz' departure (and a little bit before that). Two options caught my attention, both old funds that have reopened earlier this year:
HSBC Frontier Markets Fund (HSFAX / HSFIX) - Good performance historically. The original manager left for Ashmore and is now managing their frontier markets fund (mentioned earlier in this thread). That would generally be a big red flag except that HSBC has since recruited a new manager and he seems to be doing well. The "A" class shares (HSFAX) are available without a load from Vanguard and presumably other platforms, although the expense ratio is comparable to WAFMX (i.e. very high).
Templeton Frontier Markets Fund (TFMAX / FFRZX) - Main appeal here is the Advisor class shares (FFRZX) which are available on platforms for a low minimum and carry a expense ratio of 1.75%, quite the bargain for this category. Great YTD and 1 year numbers, but the longer performance record has been a little unsteady. Also a concern about the lead manager Mark Mobius, who was supposedly retiring from Templeton and left their other EM funds, but for some reason is still leading this one. This gives me the impression that Templeton is not too confident about handing off this fund to the other existing team members.
I ended up going with HSFAX. FYI I thought the Morgan Stanley and Ashmore funds also seemed like good options.
Laura Geritz opened new funds several months ago and it was covered on Davis's monthly commentary. Rondure New World fund, RNMIX, covers both emerging and frontier markets. We personally invested with Andrew Foster's SIGIX and VWO, and that is enough.
I had looked at RNWIX, but it is primarily a emerging markets fund with just a small amount of frontier market companies mixed in. It may still be a fine fund, but it doesn't really fit with the other options discussed here.
Agree. Digging deeper into the portfolio holding there is about 15% invested in US companies who derived majority of the earning from EM countries. Many of which are cruise ship entertainment companies.
The 6% "domicile" in frontier countries misrepresents RNWIX exposure to these markets because many of these companies "domiciled" in non-frontier countries have activity in frontier markets, and so the portfolio reflects this exposure.
In her 7/15/17 commentary, Geritz said that "Our New World strategy is a developing markets strategy. It is a mix of what I did as the lead on the Wasatch Frontier Emerging Small Country (an all-cap strategy) and the Wasatch Emerging Small Cap strategy."
So, no, it's not a fund purely focused on frontier markets -- as has been pointed out -- but an idea that I wished to further explore myself.
I owned MFMPX after its predecessor CEF open-ended. I sold when the prolonged downturn in frontier markets was underway. In my view, the asset class has not recovered and I am disinclined to re-enter it. Index rejiggering eliminated some of the countries whose markets drove the good performance and it seems there's no agreement on what index is the true benchmark. I have, however, increased my stake in both small and large cap emerging market funds during the recent rally.
72% Emerging 14% US (Total of 6 holdings, two being Carnival Corp Lines and Royal Caribbean) 6% Frontier 6% Foreign Developed 2% Cash
For anyone who's interested, I spoke to Rondure Cust Svc the other day to ask when the first actual fund reports will be out, and the answer was end of October -- as of 9/30 (end of Q3), with the 30-day lag openice mentioned.
I wonder what to make of RNWIX holding only 6% in frontier markets. Does this suggest that Geritz feels that in an emerging markets portfolio, less than 10% should be allocated to frontier markets? (Either as a general rule or based on the current investment environment.)
If the emerging markets sleeve makes up, say, 10% of your overall portfolio, that would imply the frontier markets portion would be less than 1% of your overall portfolio. Which then leads to the question of whether frontier markets can play a meaningful role at all.
I could be overthinking this, but would be an interesting question given that Geritz is in a unique position, having gone from managing a frontier markets fund to managing an emerging+frontier markets fund.
Rondure customer service was quite responsive when I asked why RNWIX hold US equity. They wrote back within 24 hours with a detailed explanation. You may want to pose your questions on the their sites.
Comments
I am a fairly aggressive investor, but I have yet to see any evidence that owning a position in Frontier Markets is an essential and beneficial part of a diversified global portfolio. Personally, we own SIGIX and PXH in the EM equity space, and I consider that to be more than adequate.
Here is an informative M* article that you may find helpful:
Frontier Markets Begin To Emerge
Kevin
https://www.msci.com/market-classification
MEASX I own this fund.
Asian orientated. 50 % Frontier although Pakistan will move "up" to Emerging this year.Both managers spent time in Frontier Countries in early careers.
https://us.matthewsasia.com/our-funds/f-24/matthews-emerging-asia-fund/investor/composition.fs#PortfolioBreakdown
https://us.matthewsasia.com/our-funds/f-24/matthews-emerging-asia-fund/investor/managers.fs
Ashmore Emerging Markets Frontier Equity fund (EFEIX) and Driehaus Frontier Emerging Markets Fund (DRFRX). Small, nimble managers which is important in this space so as to not move markets. Ashmore has a long history in the space and I think $1 minimum at Schwab. Driehaus is a very solid shop. Not as long a track record in Frotnier but a proven model for picking stocks. Minimum may be very high though to get into that fund.
It is an OEF that is certainly worth consideration if FM does well. I would have no issue getting back into it; it is still on my watch list.
ETF.com rates this the best frontier market ETF. That said, it also says that it is not particularly representative of this market segment, with a "poor tracking mean[ing] that realized holding costs are even higher." Overall, it rates FM an 'F' on a scale of A-F.
Why again are ETFs good in this market segment for ST trading? Again quoting ETF.com: "All three [ETFs in the market segment] trade poorly. FM sees the best volume most days, but it still won't be cheap to buy and sell." That may be excusable for a LT position, but is detrimental to use in ST trading.
I'm with Kevin on this one - if you get entertainment value out of these funds, that's fine. Otherwise it's a lot of research work for something that will not make a noticeable impact on your portfolio.
"if you get entertainment value out of these funds, that's fine. Otherwise it's a lot of research work for something that will not make a noticeable impact on your portfolio."
A-fricken-Men !! Well stated.
Kevin
mfs, the most profane one liner I've read here in a long time. Actually goes for many other "specialized" funds-sectors I believe.
HSBC Frontier Markets Fund (HSFAX / HSFIX) - Good performance historically. The original manager left for Ashmore and is now managing their frontier markets fund (mentioned earlier in this thread). That would generally be a big red flag except that HSBC has since recruited a new manager and he seems to be doing well. The "A" class shares (HSFAX) are available without a load from Vanguard and presumably other platforms, although the expense ratio is comparable to WAFMX (i.e. very high).
Templeton Frontier Markets Fund (TFMAX / FFRZX) - Main appeal here is the Advisor class shares (FFRZX) which are available on platforms for a low minimum and carry a expense ratio of 1.75%, quite the bargain for this category. Great YTD and 1 year numbers, but the longer performance record has been a little unsteady. Also a concern about the lead manager Mark Mobius, who was supposedly retiring from Templeton and left their other EM funds, but for some reason is still leading this one. This gives me the impression that Templeton is not too confident about handing off this fund to the other existing team members.
I ended up going with HSFAX. FYI I thought the Morgan Stanley and Ashmore funds also seemed like good options.
72% Emerging
14% US (Total of 6 holdings, two being Carnival Corp Lines and Royal Caribbean)
6% Frontier
6% Foreign Developed
2% Cash
The full holdings: http://www.rondureglobal.com/holdings/rnwix-rnwox are posted by domicile with a 1-month lag for both Rondure funds on their website.
The 6% "domicile" in frontier countries misrepresents RNWIX exposure to these markets because many of these companies "domiciled" in non-frontier countries have activity in frontier markets, and so the portfolio reflects this exposure.
In her 7/15/17 commentary, Geritz said that "Our New World strategy is a developing markets strategy. It is a mix of what I did as the lead on the Wasatch Frontier Emerging Small Country (an all-cap strategy) and the Wasatch Emerging Small Cap strategy."
So, no, it's not a fund purely focused on frontier markets -- as has been pointed out --
but an idea that I wished to further explore myself.
If the emerging markets sleeve makes up, say, 10% of your overall portfolio, that would imply the frontier markets portion would be less than 1% of your overall portfolio. Which then leads to the question of whether frontier markets can play a meaningful role at all.
I could be overthinking this, but would be an interesting question given that Geritz is in a unique position, having gone from managing a frontier markets fund to managing an emerging+frontier markets fund.