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Morgan Stanley Frontier Emerging Markets Fund, Inc., is traded on the New York Stock Exchange under the symbol FFD. The fund was launched in 2008 to invest in those countries where you did not think they even had stock exchanges. FFD is one step beyond emerging market funds. As of October 31, 2011, it had net assets of $84,962.000 of which 1.9% were in short-term investments.

FFD has its largest holdings in the following seven countries:

QATAR

15.8%

SAUDI ARABIA

12.8%

KUWAIT

9.1%

UNITED ARAB EMIRATES

8.0%

ARGENTINA

7.4%

SRI LANKA

5.6%

KAZAKHSTAN

4.4%

FFD has not done particularly well and had tax losses as follows:

Undistributed net investment income

$1,443,000

Accumulated net realized losses

($41,290,000)

Unrealized appreciation

($3,065,000)

The per share figures for the year ending October 31, 2011, were also not inspiring. They were as follows:

Return on market value

(17.74%)

Return on net asset value

(15.35%)

Investment income to net assets

2.32%

Operating expenses to net assets

2.03%

Portfolio turnover

60%

As of October 31, 2011, FFD traded at a 10.6% discount from net asset value but the discount does vary.

Investment Conclusion

Obviously FFD bet on the Middle East and lost. They do have interesting holdings, which would be difficult for an individual investor to acquire. Morgan Stanley is a very large and reputable investment manager. The securities in the portfolio are probably not held in any other portfolio that an individual may be invested in.

I think FFD should be part of everyone's portfolio simply because it adds another asset class. FFD should be purchased when its discount widens. It is a relatively small fund that is not truly liquid or actively traded. You must pick your spot to invest in FFD. The securities it holds are also obviously not particularly liquid and there can be substantial volatility at times. There is also a great deal of sovereign risk considering the countries it invests in.

Source: Morgan Stanley Frontier Emerging Markets: The Outer Limits