MILWAUKEE, WI -- (Marketwired) -- 05/10/13 -- U.S. investors, for whom it is suitable to allocate a portion of their portfolios to Frontier Market equities, may achieve greater return potential over the long term than if they invest solely in developed markets, advises Dafydd Lewis, CFA, Investment Analyst, Lloyd George Management (LGM).
The boutique asset manager, specializing in Asian Emerging and Frontier Markets investing, is part of BMO Global Asset Management and a member of BMO Financial Group. Lewis delivered this important message to delegates at the 5th Annual Make A Difference - Wisconsin Investment Conference, held earlier this week at the Pfister Hotel in Milwaukee, WI.
Frontier Markets consist of countries with market-oriented economies in the early stages of economic development, reflecting many of the same characteristics of the original Global Emerging Markets -- such as China and India -- some 20 years ago. After conducting nearly 300 meetings last year alone, representing companies from 47 countries, LGM's experienced team of three dedicated Frontier specialists, headed by Senior Portfolio Manager Thomas Vester Nielsen, CFA, continue to be firm believers in the strategic case for investing in Frontier Markets.
According to Lewis, Frontier Markets offer strong growth prospects, driven by favorable demographics and the increasing disposable income of local consumers, while remaining relatively uncorrelated to both Developed and Emerging Markets in the long term. This, Lewis said, makes them potentially attractive from two perspectives: enhanced returns and potentially lower risk levels through diversification in an overall portfolio.
"Frontier Market equities have extremely attractive valuations and offer higher dividend yields than other major markets," explained Lewis. "Meanwhile, less analyst coverage means companies are often 'under researched.' This inefficiency creates considerable opportunities for analysts willing to roll up their sleeves and do their own bottom-up research which, in turn, provides institutional investors with significant untapped investing opportunities."
As with investments of any type, potential investors should do their due diligence by researching the risks of Frontier Market equities. Specifically:
•Political climate can range from mixed to turbulent. By diversifying across sectors, countries and regions, investors may mitigate some of this risk. •Fraud is an ongoing concern but can be best managed through company visits and by focusing on companies that are audited regularly by internationally recognized firms. •Liquidity considerations also need to be taken into account, as it can take longer to invest in and divest from Frontier Market companies. •Investors should seek the advice of Frontier Market experts who have the resources available to conduct the due diligence necessary to invest in these countries. Unlike at many other firms, LGM's Frontier Markets team is dedicated to the strategy, which is not simply a carve-out of the firm's GEM strategy.
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