The firm has upped its Nigeria holding in the Baring Frontier Markets Fund to 13.2%. This represents its biggest single country holding ahead of Saudi Arabia at 9.7%, Kuwait at 9.6% and the United Arab Emirates 9.2%.
The MENA region continues to be the largest with 42.2% of the fund invested however African holdings now account for 21.6%, ahead of Asia at 13.8% and Eastern Europe at 8.6%.
Barings says that African countries are now more important to frontier market investing due to the reclassification of Qatar and UAE as emerging markets.
Local factor also play a role in Barings’ new take on Nigeria. It said Nigeria recently revised its 2013 GDP upwards to $500bn and the general elections in 2015 could provide further opportunities for investors as significant reforms in the country progress.
Particular examples of Nigerian companies Barings is targeting for investment include Guaranty Trust Bank, Zenith Bank and Nigerian Breweries.
“The core reasons to consider frontier markets as an investment portfolio remain the same today as when we launched the fund; these markets represent significant potential for long-term growth in a low-growth global economy; they are inefficient markets at an early stage of development, providing many mispriced investment opportunities; and they offer low correlations with developed and emerging equity markets,” said fund manager Michael Levy.
Levy added that return on equity and dividend yield forecasts for frontier markets in 2015 are significantly ahead of developed and emerging markets, which is reflective of higher relative economic growth rates and better early stage opportunities.
