Companies in countries with fast-growing economies and increasing middle classes should have scope to grow faster than developed economies. But while the developing world is vast, most emerging market funds are dominated by companies listed in North Asia, notably China, South Korea and Taiwan, which account for 65 per cent of MSCI Emerging Markets Index.
So to access parts of the world that few funds cover it could be worth adding a frontier markets fund. These tap into less developed areas than emerging markets, but which have the potential for stronger growth. Despite strong economic growth forecasts in a number of frontier markets, their allocation in global indices decreased from 1.9 per cent in 2015 to 1.5 per cent in 2019, as performance in the US and emerging Asian markets has been much stronger. However, frontier countries still account for 11 per cent of the world’s gross domestic product and 30 per cent of the world’s population, according to analysts at broker Winterflood.
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