New Frontiers

Over the past several years, frontier market assets have caught the attention of many investors given their high potential returns and yields. Now, as emerging markets come of age and investors seek new opportunities, we at Aberdeen feel that frontier markets deserve a closer look.

By definition, frontier markets refer to relatively small and illiquid equity markets in countries that are at an earlier stage of economic and political development than their more mature emerging-market counterparts. While they may appear unsophisticated, these economies are vibrant, with thriving private enterprise and a high level of entrepreneurship.

Trends contributing to the growth of frontier markets include supportive demographics, the application of low-cost communications and technology, increasing orthodoxy in economic management, greater political accountability and ongoing public-sector reform.

We believe that frontier markets have ample opportunities for growth and can provide diversification benefits for investors who have allocations to developed- and emerging-market equities.

 

Categorization and relative size of frontier markets

MSCI indices’ construction and MSCI equity market categorization

Note: Free float market capitalizations shown. Sources: MSCI, Renaissance Capital, May 2015. For illustrative purposes only.