Larry Speidell

We start with a look back at the primitive times of the 1990s and then fast forward to 2050 to see where countries and economies fit in the global economy. Understand the ways that resources, human capital, rule of law, and luck will play a part in the future of developed and developing markets Among other changes, the generic notions of "emerging" and "frontier" markets will be replaced by differentiation based on macro standards of economics and politics along with micro skills at the corporate and security levels. Who will the winners and losers be?

As investors are starting to look beyond emerging markets to frontier markets for favorable growth and demographic trends, they are confronted with challenges ranging from a lack of liquidity and nascent capital markets, to unfamiliar political and business risks. We examine trading volume, bid-asked spreads and analysts coverage across 1,000 stocks in 30 frontier countries. Then we compare manager results over ten years to see if active management has a future in these neglected markets.

As globalization progresses, the role of "frontier" markets is growing in the world of investing. These are markets in countries not included in the current benchmarks of MSCI EAFE and Emerging Markets. There is strong evidence that investors should open up their horizons to include over 60 small stocks markets in frontier countries. They present significant opportunities, are priced attractively and have low correlations with other markets. They also include many excellent companies and a growing number of CFA charterholders. Finally, they are home to 1 billion people who can benefit from our investment in them, while we can benefit from the fruits of their progress.