Investing in frontier markets carries plenty of dangers. Argentina’s government could decide to take over more private companies and leave investors with nothing. The war in Syria could spill into Lebanon and Jordan, upending their thriving markets. Cote d’Ivoire, Pakistan and many of the 37 frontier countries have had coups, wars and other turmoil over the past two decades.
“Buying into them has to be a long-term play,” says Jack Ablin, chief investment officer at BMO Private Bank. “You have to take some leaps of faith.” (Washington Post)
Smart money is moving into frontier markets. Market operators in these markets may not be able to eliminate all systemic risks for these investors, but there are meaningful steps that they can take to clarify their rules in order to minimize uncertainty and build trust with investors. Done right, these changes will mean that investments are not so much “leaps of faith” as they are “calculated risks”.
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