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The case for frontier market funds

We mull the appeals of a niche investment universe
The case for frontier market funds
  • As one frontier-minded fund looks to close, we assess the remaining options
  • Appealing to some high-risk investors, frontier funds come with their own quirks

Small as it is, a recent proposal to wind up the Jupiter Emerging & Frontier Income Trust (JEFI) will mark the disappearance of a more differentiated holding for some portfolios. As its name suggests, the trust has offered emerging market exposure with some allocation to less developed 'frontier' markets, allowing investors to diversify beyond China's substantial presence in emerging and Asian markets. This helped the Jupiter trust's performance last year, when it delivered a share price total return of more than 10 per cent as Chinese stocks and emerging market indices sank.

It's fair to say that frontier markets are a risky, niche proposition, and not for everyone. As Meera Hearnden, investment director at Parmenion, puts it: “I may have looked at frontier funds around 15 years ago, but soon realised that within a risk framework, these investments just don’t stack up in terms of volatility and drawdowns". AJ Bell's Ryan Hughes argues that emerging markets alone are "sufficiently high risk", while Falco Financial Planning's Matthew Bird also tends to ignore frontier markets, in part because they make up less than 1 per cent of global listed equities.

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