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White Paper : Frontier Markets And Emerging Small Countries: Elements Of An Emerging Asset Class
The only part of this white paper that seemed useful was the last chart on comparing market correlations. Otherwise there is nothing in here that is making me jump for this fund. I'm sure there are some good reasons for investing in frontier markets, but this white paper doesn't really explain them.
Ted posted another article today with an interview with Rob Arnott explaining why the US is poised for slow growth and emerging markets are the place to be. Ironically I think that interview does a much better job of promoting this fund than Wasatch's own white paper.
I typically refer people interested in the space to Forward Management's primer, since they outline the risks as well as the return potential (which is commendable). I've seen quite a few reports similar to Wasatch's (the link you've noted) that completely ignore the risks. It's all about marketing to them and that sours my opinion of the company in general.
Indeed the paper by Forward Management is quite informative. But $10 invested in their fund, Forward Frontier Strategy Investor, FRONX, at inception in January 2009, became $10.38. During the same time interval (since January 2009), $10 invested in WAEMX became $31.34. Of course, there is no way to tell what will happen with any of these funds in the future; $10 invested in WAEMX since its inception in 2007 became $13.2, which is not bad, but much smaller than its gain since January 2009. The difference between these numbers attests to the volatility of returns of WAEMX, which plunged in 2008.
Two points attracted my attention in the paper by WAFMX. First of all, they emphasized collective thinking at Wasatch, and gave a portrait of Roger Edgley, the manager of WAEMX, above the portrait of Laura Geritz, the manager of WAFMX and a co-manager of WAEMX. Perhaps this was to emphasize that Geritz, who has a relatively short investment history, will not be the only person responsible for this fund. Another point is equally significant: "The Fund is currently open to new investors but is expected to have limited capacity due to its specialized nature."
It would be great to have a better understanding of this fund before it closes its doors.
Reply to @andrei: These are good points. I noticed the portraits, but if you look on page 8, it clearly says that Geritz is leading the fund. Wasatch's paper also emphasizes that fund managers need to travel and spend time in these countries to fully understand the frontier markets. I find this a little worrisome because Geritz is also part of the team at WAEMX, which covers a different set of countries and presumably also requires a lot of legwork and travel.
I see the growth potential of frontier markets but it's hard to say when that potential will be realized. By comparison I was invested in T Rowe Price's Middle East and Africa fund TRAMX for a number of years, thinking that would be the next big thing. Eventually it probably will be, but for the time being I am more convinced by the growth prospects of Asia and the emerging markets.
Comments
Derf
Ted posted another article today with an interview with Rob Arnott explaining why the US is poised for slow growth and emerging markets are the place to be. Ironically I think that interview does a much better job of promoting this fund than Wasatch's own white paper.
Forward Management also put out a paper on the space around this time last year. It does a good job of outlining the pros/cons, available at:
http://www.forwardmgmt.com/pdf/insights/Frontier_Markets_Whitepaper.pdf
I typically refer people interested in the space to Forward Management's primer, since they outline the risks as well as the return potential (which is commendable). I've seen quite a few reports similar to Wasatch's (the link you've noted) that completely ignore the risks. It's all about marketing to them and that sours my opinion of the company in general.
Two points attracted my attention in the paper by WAFMX. First of all, they emphasized collective thinking at Wasatch, and gave a portrait of Roger Edgley, the manager of WAEMX, above the portrait of Laura Geritz, the manager of WAFMX and a co-manager of WAEMX. Perhaps this was to emphasize that Geritz, who has a relatively short investment history, will not be the only person responsible for this fund. Another point is equally significant: "The Fund is currently open to new investors but is expected to have limited capacity due to its specialized nature."
It would be great to have a better understanding of this fund before it closes its doors.
I see the growth potential of frontier markets but it's hard to say when that potential will be realized. By comparison I was invested in T Rowe Price's Middle East and Africa fund TRAMX for a number of years, thinking that would be the next big thing. Eventually it probably will be, but for the time being I am more convinced by the growth prospects of Asia and the emerging markets.