Managers of frontier funds hope to fund the next emerging markets success story. An appeal of these “frontier” economies is they have cheap labor, massive young populations, and natural resources. Corruption remains a major problem in some of these countries.
The marketplace for frontier funds remains small; the combined value of the companies in the 33 frontier markets tracked by MSCI is < 0.4% of all globally traded stocks. With such low capitalization, returns from these markets can change very quickly.