Frontier & Emerging Markets Equity Growth Fund

Frontier & Emerging Markets Equity Growth Fund: Early-Stage Economies at Compelling Valuations

Some of the most significant long-term equity opportunities of the coming decade may lie outside the US, Europe, and Japan — in economies that are still at early stages of the industrialisation, urbanisation, and middle-class formation process. These are markets where a growing consumer population is buying its first car, opening its first bank account, purchasing its first smartphone on credit, and accessing private healthcare for the first time. This is a long-term thesis, not a prediction of guaranteed outcomes — frontier and emerging market returns are highly uncertain and can be severely negative over multi-year periods.

This fund invests in listed equity companies across Africa, the Middle East, Vietnam, and select Latin American frontier markets — seeking to capture the structural growth premiums available in economies that global institutional capital has largely overlooked.

The Frontier and Emerging Market Case

Growth differential: The economies represented in this fund are growing at 5–8% annually in real terms — two to three times the growth rate of developed economies. This growth is not cyclical but structural: driven by demographics, urbanisation, technology adoption, and the expansion of formal credit and financial services to populations previously excluded.

Valuation discount: Listed companies in frontier markets trade at price-to-earnings multiples of 8–12× on average, compared to 18–22× for equivalent quality businesses in the US or Europe. This discount reflects perceived political risk, liquidity constraints, and institutional investor indifference — not fundamentally inferior business quality in all cases.

Low correlation: Frontier market equities have historically low correlation to developed market equity and bond indices. Their performance is driven primarily by local economic conditions, local monetary policy, and local market sentiment — providing genuine portfolio diversification.

Demographic advantage: Sub-Saharan Africa has the world's youngest and fastest-growing population. The Middle East's non-oil private sector is expanding rapidly. Vietnam is the beneficiary of manufacturing diversification from China. These demographic and structural tailwinds persist regardless of developed market economic conditions.

Geographic Focus

Sub-Saharan Africa (approximately 25–30%): Nigeria (banking, consumer, telecoms), Kenya (fintech, consumer, healthcare), Egypt (industrials and financial services), and South Africa (as a more liquid anchor). African banking penetration remains very low — less than 30% in most markets — providing decades of structural growth for well-managed banks and fintech platforms. The fund focuses on companies with strong local management, clean balance sheets, and demonstrated earnings growth.

Middle East — non-Gulf frontier (approximately 20–25%): Saudi Arabia, UAE, and Qatar are now mainstream emerging markets well covered by global institutions. The fund focuses instead on the less crowded frontier markets: Jordan (services, finance), Morocco (diversified, Africa-linked), and Oman (transition economy). These markets offer better entry valuations than the Gulf states and less investor crowding.

Vietnam (approximately 20–25%): Vietnam is among the most compelling individual country investment stories in Asia. Manufacturing export growth, a young educated population, rising domestic consumption, and a government actively encouraging foreign listing of domestic companies have created a listed equity market of real depth. The fund has on-the-ground research capacity in Ho Chi Minh City and Hanoi.

Andean Latin America (approximately 15–20%): Peru, Colombia, and Chile offer exposure to natural resources, growing consumer markets, and some of the most transparent regulatory environments in Latin America. Peru in particular hosts world-class mining infrastructure companies alongside domestic consumer and financial service growth stories.

Bangladesh and Pakistan (approximately 5–10%): Large, young populations, rapidly growing middle classes, and equity markets that remain underfollowed by global institutions. The fund takes small, high-conviction positions in leading domestic franchises.

Research Approach

Frontier and emerging market investing rewards on-the-ground knowledge disproportionately. The fund's investment team includes analysts resident in Lagos, Nairobi, Ho Chi Minh City, and Bogotá, who conduct primary research — visiting businesses, speaking with customers, suppliers, and regulators, and building intelligence networks that are not available to institutions operating solely from London or New York.

The investment process combines fundamental bottom-up analysis (business quality, balance sheet, management team, valuation) with country-level assessment of political stability, currency dynamics, and local liquidity conditions.

Risk Considerations

Political and regulatory risk: Many frontier markets are subject to sudden political change, expropriation risk, capital controls, and arbitrary regulatory interventions. A government change or currency crisis in any target market can cause severe temporary losses in that market's equity holdings.

Currency risk: Frontier market currencies can devalue sharply against the USD, erasing equity gains for USD investors even when local share prices are rising. Currency devaluation risk is a primary risk for frontier market investors.

Liquidity: Despite quarterly fund liquidity, the underlying holdings may be less liquid than the fund's offering terms. In a severe market stress, selling frontier market equities can take days or weeks and may require accepting very wide bid-offer spreads.

Accounting and governance risk: Accounting standards, audit quality, and corporate governance in frontier markets vary widely. Fraud, related-party transactions, and poor minority shareholder protection are risks that on-the-ground research helps mitigate but cannot eliminate.

Extreme volatility: Frontier market indices can fall 40–60% in a severe risk-off environment and are subject to idiosyncratic country crises affecting multiple investments simultaneously. Investors must be comfortable with very significant short-term drawdowns.

Suitability

This fund is exclusively appropriate for investors with high risk tolerance, long investment horizons (minimum five years), an existing core portfolio of liquid developed market assets, and the financial and psychological capacity to withstand severe short-term drawdowns. It should represent a small allocation within a broadly diversified portfolio — the frontier premium is real but comes with commensurately higher risk. Not suitable as a core holding or for investors who may need capital in the short term.

How to Invest

Contact our investment team to receive the fund's confidential information memorandum, KIID, and full disclosure of risks specific to each target market. Professional investor categorisation required. Minimum investment $200,000.

Important: Capital is at risk. Past performance is not a guarantee of future returns. This is for information purposes only and does not constitute a personal recommendation. Seek independent financial advice before investing. This fund illustrates the type of frontier markets opportunity Global Investments advises on — it is not a live investment offer.