Frontier Markets Index Fund Launched

Fundfire is reporting that Northern Trust Global Investment has launched a new frontier markets index fund. They are seeking to meet growing demand from institutional investors wanting to explore burgeoning foreign markets that don’t necessarily fit the emerging markets bill. Could be good news for some growing markets like those in Africa seeking to attract institutional investors. As Fundfire reports:

Sensing growing institutional interest in foreign markets beyond even emerging markets, Northern Trust Global Investments has launched a frontier markets index fund. The move comes as experts say frontier markets look similar to what emerging markets looked like 15 or 20 years ago, with plenty of potential upside to go along with the increased risks.

Greg Behar, senior investment strategist for Northern Trust’s global quantitative management group, says the firm developed the frontier markets fund after consulting with many of its clients and prospective clients, as many of them are considering a long-term frontier markets index allocation to provide asset diversification.

“We believe the new fund’s growth will initially be slow as investors get comfortable with the asset class, but the frontier markets strategy has strong long-term growth prospects,” Behar says.

The new product, benchmarked to the S&P Frontier Extended 150 Index, takes a diversified approach to frontier markets, a sub-asset class of emerging markets. The index strategy is offered to institutional investors in a collective trust structure.

Frontier markets are developing countries that tend to have relatively lower liquidity and higher economic growth rates than emerging or developed markets. Among the economies currently considered “frontier” are Kenya, Jordan, Lebanon, Pakistan, Vietnam, Romania and Ukraine. Behar compares the frontier markets of today to emerging markets 20 years ago and says these economies are the “next generation.”

He notes that while emerging markets’ growth was slow in their early days, they have grown significantly as investors realize the importance of getting exposure to them. “We expect the demand [for frontier markets] to be similar to that of emerging markets,” he says. “Frontier markets are a relatively new asset class, and a lot of discussion at this phase is educational in nature.” Click here for more.