Fund managers searching for yield are increasing exposure to frontier markets (FM) as a diversification from emerging markets (EM), as the latter have been offering negative relative returns since January, according to MSCI data.
Barings Asset Management said on Monday it plans to launch a frontier markets fund in coming weeks, with a projected 70 percent exposure to frontier markets such as Nigeria, Saudi Arabia, the UAE, Sri Lanka and Ukraine.
Emerging markets indices posted relative negative returns compared to developed and frontier markets in the first quarter, index compiler MSCI’s 2013 quarterly survey showed. The main emerging benchmark returned a negative 2.14 percent for the quarter, with the BRIC index also posting a loss, though a better performance of Latin American markets offered some promising signs with a 0.48 percent increase.
Southeast Asia posted the top returns, with double-digit figures from the MSCI Philippines Index of 17.87 percent growth and Indonesia returning 13.19 percent. That was a stark contrast to the Brazil, Russia, India, China and Korean indices, which delivered negative Q1 results.
Weak relative performance has turned investors further afield to boost earnings with top performers Kenya, UAE and Bulgaria returning more than 20 percent. In 2012 the Kenyan benchmark rose 54 percent, the data showed.