Investors who heeded the call of Jim O'Neill, now chairman of
Goldman Sachs Asset Management, to move into the BRIC markets
(frontier markets weren't even a twinkle in an anlysts' eye then)
during the last decade were richly rewarded.
[caption id="attachment_62094" align="alignright" width="300"
The combined MSCI index for Brazil, Russia, India and China
returned an impressive 15.39% annually in the 10 years to May
Brazil was the most profitable market with an 18.24% yearly
return, China the relative laggard at 11.70%. That still swamped
the MSCI USA index, which offered a paltry 0.86% increase per year,
and the MSCI EAFE benchmark of developed foreign markets, which
maintained a 2.48% growth pace.
The BRICs have cooled off substantially since 2010 of course.
Now O'Neill suggests looking further afield into so-called frontier
markets, which may be starting the period of steep growth that the
emerging market giants experienced after 2000.
Mark Mobius, manager from mutual fund provider Franklin
Templeton who was an early emerging markets guru, also talks up
frontier markets investing in his recent book, "Passport to
It's fine to theorize that markets like Jamaica, Kazakhstan, or
Oman are ready to come into their own as drivers of global economic
growth. But the armchair investor needs to know how to get a piece
of them that they can also get out of when the time comes to sell.
A growing number of ETFs and funds offer a liquid way in.
The Claymore/BNY Mellon Frontier Markets ETF (
) provides exposure to, among others, Egypt, Colombia, Kazakhstan,
Chile, Poland, Lebanon, Peru, and Oman. It slightly outperformed
the iShares MSCI Emerging Markets Index (
) over the past year, losing a mere 16.1% instead of 16.9%
The Market Vectors Africa ETF (
) offers access to markets across the continent including Nigeria,
Morocco and Egypt. Twelve-month performance is 15.5%
The PowerShares MENA Frontier Countries ETF (
) holdings focus on the Middle East, including Kuwait, Jordan,
the United Arab Emirates, Morocco, and Oman. It lost 15.4% over the
The Morgan Stanley Frontier Emerging Markets Fund (
) is a closed-end mutual fund that invests in exotic markets
globally. The Middle East and Asia, but also Jamaica, Trinidad
& Tobago, Bulgaria, and the Ukraine. It is a relative star,
having declined by a mere 12.8% over the past year.
Many country specific ETFs are also springing up for frontier
markets, for example the Market Vectors Vietnam fund (
A prominent traditional mutual fund investing in frontier
markets is Templeton Frontier Markets A (
). This is managed by the celebrated Mobius, but beware of
TFMAX has a 5.75% sales charge when you buy it. This compares
quite unfavorably with the nominal commission you'll pay to buy
ETFs through a discount broker. TFMAX also has annual expenses of
2.08%, which also compares unfavorably with the ETFs, whose maximum
expense ratio is .83%. The extra cost may be worth it. It currently
doesn't look like it though, judging by the past year. Mobius'
performance - off 12.9%, is similar to that of Morgan Stanley's
closed-end fund, though far better than any of the passively