Pension funds are increasingly looking towards frontier markets for diversification according to new research.
This survey of European pension funds, institutional investors and wealth managers found that the majority (85 per cent) agreed these markets offered some of the best investment opportunities, while over 90 per cent agreed that this sector provided attractive diversification benefits from emerging and developed markets.
When selecting frontier funds though it was notable that these professional manager placed more importance on a fund’s ESG record than either the investment fees, its size or its liquidity. However ESG considerations were not rated as highly as a fund’s track record.
The study was conducted by Dragon Capital a Vietnam based asset management company. Its deputy CIO Dr. Tuan Le Anh says: “Frontier markets have high rates of GDP growth and enjoy periods of rapid urbanisation, growing middle class formation, increased domestic consumption, and elevated levels of foreign direct investment, all of which make for attractive investment opportunities.
“And as respondents to the survey have found, the lack of coverage of companies in frontier markets means there are ample opportunities to find hidden gems.”