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Frontier markets frenzy: the sector’s biggest funds revealed

Citywire Global scans the database to find the largest strategies currently in operation and to look at how size and performance compare.

Frontiers at the forefront

The reputation of frontier market equity funds has risen dramatically over a short space of time, with many generalist investors scanning the space as an alternative to their wider emerging market counterparts.

With the sector showing strong growth in assets terms, Citywire Global has taken a closer look at the biggest funds currently in operation and whether investors are being rewarded in performance terms.

Note: Funds drawn from the Citywire database. Countdown is done in order of current AuM, which is supplied on request from the fund management group or drawn from factsheets or Lipper IM data. Performance is compared to the Citywire assigned benchmark.

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Sanlam African Frontier Markets

Fund manager: Stephane Bwakira

Current assets under management: $75 million

The first fund on the list is more specialist than a number of its peers. Stephen Bwakira has run the Africa-centric equity fund since taking over from Eric Kibe in October 2012.

He has a strong focus on the Nigerian market, which makes up 42% of the fund at present. This is ahead of Egypt (31%) and Kenya (14%). On a sector basis, almost half of the fund is invested in financials.

Speaking to Citywire Global in March of last year, Bwakira said investors in African equities were perhaps too fixated on the fortunes of South Africa when the other economies were showing greater growth potential.

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Morgan Stanley Galaxy Fund Frontier Emerging Markets

Fund manager: Timothy Drinkall

Current assets under management: $84.2 million

One of the newer funds on the list, having launched in March of last year, Morgan Stanley’s Citywire A-rated manager Timothy Drinkall has quickly acquired assets in his frontier markets fund.

Having posted stronger performance than the broad frontier markets index since launch, Drinkall has mainly invested in the Gulf Coast nations, such as UAE, Qatar and Saudi Arabia. These three markets make up 41% of geographic exposure at present.

On a sector basis, much like many of his peers, the New York-based manager has invested mainly in the financials sector. Stocks in this area make up 40% of overall exposure according to the latest factsheet.

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Tundra Frontier Opportunities

Fund manager: Mattias Martinsson

Current assets under management: $86 million

Along with Drinkall, Mattias Martinsson is one of the newest players in this growing sector. He works for independent investment house Tundra Fonder, which is based in Sweden.

He runs a slightly more diversified fund than many of his peers, with financials and consumer discretionary stocks accounting for 25% and 22% of the fund’s sector exposure respectively.

His biggest country bet is currently Pakistan at 31%, while Nigeria is 17% and he holds 16% in cash or cash equivalents. Martinsson trails the sector benchmark over the first 11 months of the fund’s existence by 1.2%.

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Russell IF Frontier Markets Equity

Fund manager: Scott Crawshaw

Current assets under management: $255.46 million

Kicking up a gear in terms of assets is the Russell Investment’s frontier markets strategy, which is the first of seven entrants boasting more than $250 million in assets under management.

The fund is largely exposed to the African equity market, which makes up 38% of overall exposure. This is ahead of emerging Asia (28%) and the Middle East (28%). Financials once again top the sector bets at 35% of the total exposure.

In performance terms, manager Scott Crawshaw slightly lags the benchmark over the three years to the end of March. The fund has returned 23.7% at a time when the fund’s benchmark rose 28%.

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Aberdeen Global – Frontier Markets Equity

Fund manager: Devan Kaloo

Current assets under management: $279.5 million

Devan Kaloo is one of the best known emerging markets managers in operation and has also posted strong three-year performance on the frontier markets-focused fund.

The Citywire A-rated manager runs a diverse portfolio in geographic terms, with no single country accounting for more than 17% of the fund. His largest bets in the 45-stock fund are currently Nigeria, Sri Lanka and Kenya.

Over the year to the end of March, Aberdeen has witnessed a strong increase of inflows into this fund. Assets under management have risen from $143 million almost exactly a year ago.

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Coronation Africa Frontiers

Fund manager: Peter Leger

Current assets under management: $550 million

The list moves up again, with the Coronation Africa Frontiers fund representing the first of a handful of funds on the Citywire radar with over half a billion dollars in assets.

The fund has a stronger tilt towards the consumer sector than others in this countdown, with consumer goods representing 28% of the fund’s sector exposure. Once again Nigeria emerges top of the country bets, making up nearly a quarter of the geographic allocation.

The Coronation Africa Frontiers is another to have seen significant inflows over the past 12 months. Its assets under management have grown from $346 million a year ago to $550 million in the latest available data, a 37% increase.

Against its more Africa-focused benchmark, the Coronation Africa Frontiers fund has posted very strong performance. It has returned 39.6% against a benchmark rise of 3%.

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HSBC GIF Frontier Markets

Fund manager: Andrew Brudenell

Current assets under management: $696 million

Pipping the Coronation Africa Frontiers fund to be recognised as the fourth largest frontier market equity fund in the Citywire database is Andrew Brudenell’s recently soft-closed fund.

The fund, which Brudenell has run since its launch in December 2011, has achieved a strong return since its launch. It has beaten the broad market index by 22% over this analysis period.

Brudenell has a strong weighting towards financials, which makes up 47% of the fund at present. The majority of geographic exposure is focused on the MENA region, which comprises nearly half of the total portfolio on a regional basis.

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Schroder ISF Frontier Markets Equity

Fund managers: Alan Conway & Rami Sidani

Current assets under management: $834 million

Schroders can take the crown for running the fastest growing fund in our countdown, with Allan Conway and Rami Sidani’s fund having grown from $84.8 million in assets on year ago.

Conway recently spoke to Citywire Global about concerns over the speed of growth in the sector. He said, while opportunities remain in the long-term, a short-term acceleration in assets could prove problematic.

Conway and Sidani are currently underweight financials and have opted for marginal overweights in energy and materials. On a country basis, they are primarily focused on the Gulf nations, with the top four country bets currently UAE, Qatar, Kuwait and Saudi Arabia.

The Schroders fund is the only one of those in the upper echelons of the frontier market fund heavyweights not currently soft-closed.

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LG Frontier Markets

Fund manager: Thomas Vester

Current assets under management: $887.5 million

Missing out on top spot but still nearing $1 billion in assets over a relatively short period of time is the frontier markets strategy run by BMO Asset Management subsidiary Lloyd George Asset Management.

The fund, which is run by Thomas Vester, was launched as a Dublin-domiciled vehicle in December 2011 and has posted strong outperformance since this date.

Vester, who was recently named CIO of the London-based unit, recently warned of the lines between emerging and frontier markets starting to blur and also voiced concern over the rampant level of inflows into the sector.

inflows slowed relatively recently, the Lloyd George Frontier Markets fund is another to have seen a marked increase in assets over the past 12 months. It has leapt from $352 million in March 2013 to its current level of $887 million.

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Templeton Frontier Markets

Fund manager: Mark Mobius

Current assets under management: $2.13 billion

The largest frontier market fund in the Citywire database is overseen by one of the most well-known faces in the emerging market investment universe, Mark Mobius. The fund was soft-closed in July 2013 but continues to hold assets of over $2.1 billion.

The Franklin Templeton manager has led on the group's Frontier Markets fund since it was launched in October 2008. He currently holds 81 positions in the fund, with a strong emphasis on small-cap investments.

On a sector basis, Mobius is mainly exposed to Saudi Arabia (14.3%) and Nigeria (11.3%). This is while financials, which is a slight underweight compared to the benchmark, is the largest sector exposure. It makes up 44% of the fund at present.

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Related Fund Managers

Tim Drinkall
Tim Drinkall
1/19 in Equity - Frontier Markets (Performance over 3 years) Average Total Return: 58.72%
Mattias Martinsson
Mattias Martinsson
13/29 in Equity - Frontier Markets (Performance over 1 year) Average Total Return: -9.78%
Andrew Brudenell
Andrew Brudenell
3/19 in Equity - Frontier Markets (Performance over 3 years) Average Total Return: 56.51%
Peter Leger
Peter Leger
5/44 in Equity - Emerging Markets Other (Performance over 3 years) Average Total Return: 49.29%
Devan Kaloo
Devan Kaloo
211/371 in Equity - Global Emerging Markets (Performance over 3 years) Average Total Return: 14.55%
Mark Mobius
Mark Mobius
355/371 in Equity - Global Emerging Markets (Performance over 3 years) Average Total Return: 2.56%
Allan Conway
Allan Conway
169/371 in Equity - Global Emerging Markets (Performance over 3 years) Average Total Return: 17.52%
Stephane Bwakira
Stephane Bwakira
Thomas Vester
Thomas Vester
Stephane Bwakira
Stephane Bwakira
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