Frontier Markets  

Somerset launches into frontier markets

Somerset launches into frontier markets

Emerging market specialist Somerset Capital Management has launched a fund to tap into even less developed economies.

The MI Somerset Frontier Markets fund will invest in companies that operate primarily in frontier market countries in Asia, Eastern Europe, the Middle East, Africa and Latin America. 

It will be actively managed and typically hold between 40 and 50 stocks.

The firm said the fund had been launched due to demand from its UK and continental European client base.

George Birch Reynardson, who joined Somerset in 2007, is lead manager of the strategy.

He has focused on frontier markets since 2010. He will be supported by fund manager Mark Asquith and senior analyst Kumar Pandit.

Mr Birch Reynardson said frontier markets in 2018 were reminiscent of emerging markets in the 1990s, when the company first started investing in them.

He said: "The institutions in these markets are immature, the industries are under-penetrated, and the businesses are under-covered and under-appreciated.

"All this makes for an extremely compelling investment opportunity."

However, Dennis Hall, managing director at Yellowtail Financial Planning, said most retail investors did not need a fund focusing on frontier markets.

Mr Hall said: "For the small minority who think they do, they don’t need a highly focused fund (40 to 50 stocks) from Somerset Capital, a manager seemingly expert in emerging markets, which they believe translates into frontier markets expertise."

Mr Hall said over the last five years, an investor would have done as well in an emerging markets ETF as a Somerset Capital Emerging Market OEIC.

He said: "There is no reason to so severely reduce your diversification without any meaningful evidence of significant outperformance potential."

The MI Somerset Frontier Markets Fund is available in US dollar, UK sterling and euro share classes.

It is domiciled in Ireland and is open for investment twice a month.