Barings to launch Frontier Markets fund

Baring Asset Management is planning to launch Baring Frontier Markets fund.
The fund, managed by Michael Levy, investment manager and by Dr Ghadir Abu Leil-Cooper, head of EMEA, will seek to achieve long-term capital growth through at least 70% exposure to frontier markets.

The fund will be UCITS, domiciled in Ireland. The minimum investment for the retail share class is £2500 with an annual management fee of 2%. A share class for institutional investors is also available.

The investment process behind the Baring Frontier Markets Fund will draw on Barings’ experience of investing in emerging and frontier markets at an early stage. Barings was one of the earliest investors in China, early in Latin America, and was there when the Berlin Wall came down to bring Eastern Europe and Russia to its clients.

The managers will use a combination of top-down analysis of the political and economic factors affecting each country and industry, together with a disciplined, bottom-up stock selection process to seek strong investment returns in markets that fall outside developed or emerging market benchmarks. Examples of frontier markets include Nigeria, Saudi Arabia, the UAE, Sri Lanka and the Ukraine.

“Barings believes frontier markets offer the potential for strong long-term growth, in a low growth world. Low correlation with both emerging and developed markets, as well as low intra-country correlation, means that frontier markets also offer diversification benefits,” the firm said.

Frontiers are markets at an early stage of development and as such they have traditionally carried higher governance risk. However, Barings believes there has been a tangible change in policy mix across these countries: democratisation has a chance of taking root in the Middle East following the Arab Spring, and there has been a general trend away from autocratic to democratic regimes in Africa.

“Over the last 20 years, the free float market capitalisation of core emerging markets (MSCI Emerging Markets) has increased 25 fold and we believe that frontier markets are now positioned where emerging markets were 20 years ago, poised to become the next big opportunity in the coming years. We believe these markets are widely mispriced and hold undiscovered investment opportunities,” said Levy.

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