InvestmentsMay 2 2013

Product review: Baring Frontier Markets fund

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ByAimee Steen

Growth in frontier markets is the aim of the latest offering from Baring Asset Management.

The Baring Frontier Markets fund is headed by Michael Levy and focuses on economies with rapid growth potential.

Mr Levy, supported by Dr Ghadir Abu Leil-Cooper, head of Europe, the Middle East and Africa at Barings, will adopt a capital growth remit, aimed at investors prepared to join the fund for the long haul.

Nigeria, Saudi Arabia, Sri Lanka and the Ukraine are all potential locations for investments. At least 70 per cent of the fund will be invested in frontier markets.

The manager plans to take a top-down approach to investing, assessing the political and economic factors associated with each company, combined with a bottom-up stock-selection process to seek strong opportunities.

Mr Levy said frontier markets are positioned where emerging markets were 20 years ago and are “poised to be the next big opportunity”, adding that they are widely mispriced and hold undiscovered gems.

The under-penetration of consumer goods and services is one area of interest, he said, along with the under-utilisation of natural resources such as agricultural land, oil, gas and minerals.

Domiciled in Ireland, the minimum investment for retail investors is £2,500 with an annual management charge of 2 per cent.

MM View:

Frontier markets certainly have positive growth prospects. According to data from the International Monetary Fund, the compound annualised GDP projection from 2010 to 2017 is 8.5 per cent for Iraq, 7.8 per cent for Ghana, and 7.6 per cent for Qatar.

But investors should not fall into the trap of believing that rising GDP automatically means greater investment returns. The two do not necessarily align and there are still many problems in frontier countries.

But if a fund manager can dig through these problems to find solid companies, investors could be on to a winner. It is no cheap venture, however. An AMC of 2 per cent is a high price to pay for fund management these days – and it comes with a great deal of risk, too.