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The Final Frontier?
By Jim Wiandt

Jim WiandtEveryone's talking about "frontier" markets now. So much so, that the quotation marks are about to come off of "frontier," and it's threatening to morph into an asset class. If it manages that, it would follow the path of its brethren before it: Commodities, Real Estate and, of course, Emerging Markets (now not just with no quotes but also with capitalization).

So is it for real? Are frontier markets a legitimate investment opportunity?

Well, I have read carefully through all of the articles in this issue and my conclusion is, yeah, there's something definitely there, but no one seems to agree on exactly what it is, from the correlation and volatility numbers, to what countries are to be considered frontier. But I do think that it's more than a fad, and about more than the search for elusive returns (indeed, the story may be more about the search for elusive correlation benefit, which frontier markets do clearly seem to have—for now, anyway).

We've got representation from three of the biggest players in the rush to benchmark and package the frontier markets as an asset class: FTSE, MSCI and S&P. All three have a considerable history around Emerging Markets, and are keepers of the most recognized indexes in the space. From FTSE, we've got Marc De Luise tackling the rather sticky question of what frontier markets ARE (and consensus is hard to find). MSCI weighs in with a look at how the Emerging Markets asset class has evolved over the years. The morphing of those markets toward the performance of developed markets as investing flows have increased (enormously) is part of what drives the allure of frontier markets. From S&P, David Blitzer looks at the core issue around emerging/frontier: correlations.

Anchoring our section on the frontier markets is one of our patented roundtables, where we ask the same few questions of a broad range of industry experts … this one really highlights how all over the map this topic is.

This issue also includes an excellent feature from Tom Anderson at SSgA on how institutional investors use ETFs. I really don't think that subject has been covered before in an article, and he's done it well. Murray Coleman then does his best to explain the new actively managed bond ETFs that are out or coming … it's a nice window into active and into bonds in the ETF space.

We've also got a great (and somewhat prickly) point/counterpoint debate in response to the David Blanchett and Gregory Kasten feature article we ran in the July/August 2008 issue on whether ETFs work in the 401(k) platform. Darwin Abrahamson, CEO of Invest n Retire, says: ABSOLUTELY.

Finally, we've got Brad Zigler being loony as always. Is it a surprise that "The Curmudgeon" might be skeptical about frontier markets?

This is a great issue on a very timely topic. Enjoy.


Jim Wiandt Sign
Jim Wiandt
Editor
 

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