Frontier Markets, an interesting option for investors
There are about 208 countries in the world. Of these, about 25 are classified as developed markets and another 26 are classified as emerging markets, although only seven of these really feature in global equity portfolios. This leaves us with a list of 176 countries, our opportunity set, where the levels of foreign ownership and the quality and quantity of research coverage fall well below the top 32 countries.
The greater the number of market participants focussing on any publicly traded financial asset, on average the greater the chance of that asset being priced correctly. We view this frontier and smaller emerging market opportunity set as a huge source of potential alpha which we can apply our bottom up investment process to. The Fiera Frontier Markets team’s research and financial modelling process, will often come to a very different conclusion of the fair value of a company than that attributed by “the market”. Combined with our country risk analysis we seek to construct a portfolio of companies in countries that have the strongest economic, political and stock market reforms, which we believe creates the optimal environment for seeking out companies that can compound their earnings over many years, and where we can buy these companies at attractive valuations.
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Video writeup: Unlocking Opportunities in Reform-Led Economies