HSBC: Frontier markets 'less correlated' than GEMs

Frontier markets are less volatile, more diversified and a better bet for dividends than their broader emerging market peers, according to HSBC's Andrew Brudenell.

The manager of the HSBC GIF Frontiers fund said the asset class remains under-appreciated by investors, even within the context of their allocations to emerging markets. Brudenell suggested investors should look to hold 5%-10% of their emerging market allocation within frontier markets, up from an average level of around 3% now. “Everyone has got a little bit excited about emerging markets in recent years, but frontier markets as a whole are less correlated to global equities than GEMs, and are also less volatile,” he said. Using Bloomberg data to correlate weekly index levels over...