Investors searching for growth are increasingly looking beyond the more familiar emerging markets to “frontier markets.” While it was rare for family office investors to invest in even the largest emerging markets such as China and India as recently as 20 years ago, now emerging markets are an established part of most family office investment portfolios. Frontier markets will likely make the same journey over the coming decades, and investors who can bear the risks of these markets will profit. For investors with long-term investment horizons who can withstand volatility and liquidity, frontier markets can provide access to attractive growth potential and offer portfolio diversification benefits.
Frontier markets consist of rapidly growing and industrializing countries with less developed capital markets such as Kuwait, Argentina, Pakistan, Vietnam, and Nigeria. These countries are in earlier stages of economic development than their emerging market neighbors and have fewer investable companies. Frontier markets can be found all around the world, from Africa and the Middle East, to developing markets in Asia, Eastern Europe and Latin America.
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