QVM Group

MSCI Frontier Markets Index Leaves Emerging Markets In the Dust

Aquater and Mr. T:

Gentlemen, I did in fact recommend a specific fund that invests in the Middle East portion of Frontier markets -- TRAMX.

As money floods into that part of the world, due to the high price of oil, those countries and the companies in them are growing rapidly.

The graph is of the MSCI Frontier Markets composite index.

There are three areas within the frontier markets as defined by MSCI --- basically Middle East, Africa and Eastern/Central Europe. Year-to-date Africa is doing best, Middle East second best and Eastern/Central Europe a poor third.

TRAMX invests in the better two of the three, but mostly Middle East. I do hope that helps you understand why I recommended it as I did.

Yes, there is limited set of options for pure frontier market funds today, but that is and will be changing. The lack of many pure frontier market choices is not a reason to avoid publication. A thoughtful approach to investing often involves researching situations before they become available – good fortune favors a prepared mind.

I understand Deutsche Bank is offering frontier fund product in Europe now; and reports are that Barclays may be launching a frontier fund in the US based on the MSCI Frontier Market index.

If you would like to know about larger individual companies in frontier markets (not recommended as direct investments, but useful to help understand the underlying holdings in funds you may purchase now or later), you can read other articles I have posted on my blog at QVMgroup.com/invest

There are several mutual funds that have a smattering of frontier market exposure, but not enough to warrant an allocation to the category. Seeking Alpha also does not publish articles that focus on mutual funds as a matter of editorial policy

Some funds are more name hype than reality, such as a Russia and Eastern Europe fund that is primary invested in Russia.

However, the direct response to your criticism of the article is that you didn’t really read it. I named and recommended a frontier market fund that I hold in my own account -- TRAMX from T. Rowe Price. It is a good way now to enter the Middle East component of the frontier markets, but only after you understand the risk factors, not the least of which is the extremely thin trading volume and possible liquidity squeezes that could result if investors shift their interest.

My principal recommendation is that you begin to familiarize yourself with frontier markets so that when the several likely future offerings become available, you can make an informed decision and not simply jump in. Now is a good time to study the opportunity when few investment options exist, because that is a time when your rational side will more likely rule over your emotional side.

Richard Shaw, Author