The next big challenge for frontier market investors

Taking 2013 as a whole, emerging markets fell by 4.4% at a time when the MSCI Frontier Markets index rose by an impressive 23.6% (in sterling, net total return).

Meanwhile, over the first seven months of 2014, the MSCI Emerging Markets index is up by 6.1% against 20% from frontier markets. The rationale for investing in frontier markets is not only to take advantage of significantly higher economic growth rates versus the developed world, but also to benefit from a re-rating of the valuation of companies when they achieve emerging market status.  The most notable example of this in recent times is the UAE, which is now officially classed as an emerging market following an upgrade in June. UAE stock markets have risen 35.4% in sterling terms so...