Market Insight - Diversity on the Frontier

Apr 20, 2012

The integration of global financial markets has caused concern that future returns and volatility may become increasingly correlated with developed markets. Risk-tolerant investors are exploring fledgling equity markets in far flung corners of the globe, hoping to find better growth prospects and investment returns that are less dependent on global integration. In this paper we review the potential for international diversification that frontier markets could offer relative to its more mature emerging and developed counterparts. We observe that the relative isolation and idiosyncratic nature of frontier markets could provide an attractive source of equity exposure while mitigating overall portfolio volatility.