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I am curious as to what people feel is the best way to invest in frontier markets. I now Wasatch just put out their new fund, but any one else have recommendations to it as a way to invest in frontier markets. Just looking to put about 3 percent of my retirement or so into it, thanks.
I would check out the Guggenheim Frontier Markets ETF (FRN) and the MS Frontier Markets CEF (FFD). Each fund replicates an entirely different index which makes them hard to compare. FRN, for instance, has big relative weightings in Latin America in countries not usually thought to be frontier markets (Chile, Peru).
I am of the camp that believes active management is a better option than indexing when it comes to the huge inefficiencies in frontier markets, just as domestic small cap tends to be much less efficient than large cap. Wasatch has a great pedigree in small cap and their EM small cap has a great record. Laura Geritz is the co-manager there, and she runs the new Frontier SC fund. Expenses are high, but capped at 2.25%, which is actually quite low for any kind of active frontier market investment. Yeah, it's a lot higher than FRN's 0.70%, but I would rather have an active hand instead of what I view as a rather strange concoction of stocks put together so Guggenheim could launch their ETF.
And be very careful about how much you allocate to something like this. My expectation is that volatility could be high.
Bob, I appreciate your comments. I liked Templeton Frontier but didn't really want to pay a load or TF at Fido. You bring out good points in regards to inefficiencies and the benefits of having active management. I am not allocated a whole lot to something like this, maybe 2% overall. I know that volatility can be very high in these oftentimes illiquid and less regulated countries.
Scott, How do you think TRAMX compares with WAFMX, FFRMX and HLFMX, which are what I can get through Fido? My wifes IRA is through T. Rowe so I can also go that route.
These funds are typically feast or famine type. I personally would not invest in these markets unless you want some adventure and investing a very small percentage of your assets for fun.
Comments
This MFO link might shed some light on the subject:
http://www.mutualfundobserver.com/discussions-3/#/discussion/2390/emerging-market-companies-having-a-multinational-parent-makes-a-big-difference
And be very careful about how much you allocate to something like this. My expectation is that volatility could be high.