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Africa and the Middle East are being touted as the next frontier markets come to fruition as they show potential to grow at attractive rates versus other emerging markets. They are basically the "emerging emerging" markets, combining good demographics with growing urbanisation which in turn is generating higher economic growth.

It is a region full of opportunity and while we cannot rule out political and social unrest, it has nevertheless undergone reforms to liberalise their economies over the last decade. This is still work in progress, but the reality is peace and democracy is gaining momentum, which in turn is resulting in better governance.

The Middle East and North Africa is a region of two halves. Countries like Egypt, Morroco, Tunisia and Jordan benefit from large and young populations where increased productivity and higher incomes have led to improving standards of living and higher consumption. Other markets like Saudi Arabia, UAE, Oman, Qatar, Bahrain and Kuwait are benefiting from soaring oil prices, strong currencies and major upgrades to their infrastructure.

Opportunities also abound in the rest of Africa. The continent is now starting to compete in terms of trade. GDP growth has also outpaced the rest of the world since 2001 and was in excess of 6 per cent last year compared with global growth of 3.8 per cent.

Investing in these frontier markets may not be everyone’s cup of tea. However, those who feel the region is rife with opportunities can now gain access through several funds. One that looks particularly interesting is the recently launched Investec Africa & Middle East fund. Investing in Africa is nothing new to Investec. The company was established in South Africa in 1974 and has been managing African assets for the last 16 years.

One of its attractions is it spans across the whole breadth of the African continent and not just North Africa like some of its peers. This is, of course, subject to where there are stock markets and reasonable liquidity. The managers can therefore have a greater investable universe of around 350 companies from which to cherrypick the best companies.

The fund was launched on 2 June and is jointly managed by Roelof Horne and Amr Seif who are based in South Africa and London respectively. They also have the additional regional support from offices based in Botswana and Namibia.

It has a concentrated portfolio of 40-60 stocks. There are no benchmark constraints but from a risk point of view, the fund is unlikely to invest in companies with market capitalisations of less than $100m (£50m). It will invest a minimum of 20 per cent and up to a maximum of 80 per cent in the MENA region. It is the same split for sub-Saharan Africa. Prior to launch the model portfolio had 55 per cent in the MENA region and 45 per cent in sub-Saharan Africa.

Exposure to any singly country can be as high as 40 per cent, but this would be an extreme position. There is also good diversification across sectors with exposure to financials, industrials and communications among the largest sectors and energy surprisingly makes up a small proportion of the fund. This is clearly a high risk fund but the managers are hoping to achieve a return of at least 15-20 per cent a year.

Although many African companies have suffered from liquidity issues in the past, this is now improving. It does not however suffer from some of the foreign ownership restrictions like the Middle East. Having said this, Investec is able to gain access to closed markets like Saudi Arabia which can overcome such foreign ownership problems.

This is a UK-onshore Oeic with daily dealing and has a straight forward annual charge of 1.5 per cent. One big bonus with this fund is there is no performance fee considering the specialist area of investment. Investec says the fund only has a capacity of £500m and they will close it to new investment once this is reached. It may take some time before this is filled, but investors may benefit from the prospects of superior returns by getting in early. Given the likely volatility in this region, investors must take a long-term view of at least 10 years.