Frontier markets have the potential to deliver annual growth of 11 per cent over the next 10 years, according to Swiss & Global Asset Management.
Frontier markets are countries where gross domestic product (GDP) is particularly low or it is difficult for foreign investors to gain access, and so do not qualify as emerging markets. As a result frontier market stocks tend to trade on cheaper valuations than emerging markets stocks, but are considered to be even higher risk.
Swiss & Global expects that frontier markets' growth will be driven by relatively low stock market penetration compared with overall GDP, strong demographic profiles and good economic prospects. Swiss & Global is particularly bullish on the prospects for Nigeria, Tunisia, Kazakhstan and Mongolia.
"Frontier markets offer investors the chance to enter a market at the beginning of its growth story and the potential for superior investment returns," said Andrzej Blachut, head of emerging market equities at Swiss and & Global. "The gap between emerging and developed markets is narrowing and frontier markets appeal to investors who are looking for the next undiscovered gem."
Funds offering exposure to emerging markets are growing in numbers. Recent launches include the Schroders ISF Frontier Markets Equity fund and the BlackRock Frontiers investment trust.
Octopus seeks £30m with new VCT
Octopus investments hopes to raise £30m with the launch of its Octopus Titan VCT 5 venture capital trust (VCT).
The generalist VCT will invest in 20 to 30 unquoted companies in industry sectors where its managers believe there is potential for significant capital growth. It will target deals with a typical size of between £200,000 and £2m. The minimum investment you can make in the VCT’s initial public offering is £3,000.
VCTs offer income tax relief of 30 per cent, providing you hold the shares for a minimum of five years, and dividend payments are tax free. VCT shares do not incur capital gains tax when they are sold.
