Exploiting Inefficiencies In Frontier Markets

T. Rowe Price’s Frontier Markets team explains why their boots-on-the-ground approach is critical to identifying opportunities in this under-researched asset class.

Frontier markets include some of the fastest growing economies globally, and the region as a whole is expected to outpace emerging markets and developed markets in terms of GDP growth through the rest of this decade, and likely beyond. Furthermore, a combination of peace, improving politics, and a focus on economic management is now attracting the investment necessary to help unlock their potential.

Historical analysis shows that frontier markets have significantly outperformed emerging markets and most developed market regions on a risk-adjusted basis over the past five years. And while investors should still expect some volatility, in a portfolio context one of frontiers’ key attributes is a very low level of correlation with other asset classes, thereby offering significant diversification benefits.

T. Rowe Price has been investing in frontier markets since 1995 – over two decades before inception of the MSCI Frontier Markets index – and launched a dedicated fund in 2014. Managed by Oliver Bell, who has spent 20 years researching and investing in frontier, the T. Rowe Price Frontier Markets Equity Fund1 is a “pure” frontier fund; it only invests in countries outside of developed and emerging market indices, and actively invests off-benchmark in pursuit of the best opportunities.

With information more scarce and company management unlikely to travel through London, the team takes a truly boots-on-the-ground approach to frontier investing. Each year the team travels in excess of 1 million miles to meet management teams as many times as possible in order to get to know each company inside out. The ultimate goal is to go on a long-term journey with a diversified basket of around 70 high quality growth companies.

This approach has been rewarding, and highlights the need for an active approach in an asset class that cannot be fully replicated through a passive index. Since launch in June 2014, the USD 384m Fund has returned 4.48% on an annualised basis versus -0.11% for the MSCI Frontier Markets Index.2

By making at least a small allocation to frontier today, and staying invested in what are predominantly long-term investment opportunities, investors can potentially achieve strong investment returns as companies and economies grow rapidly from a very low base.

For more information, please visit: www.troweprice.com/frontier

T. Rowe Price Funds SICAV – Frontier Markets Equity Fund

Data shown for the I share class, net of fees in USD terms from 24 June 2014 to 30 September 2017. Past performance is not a reliable indicator of future performance. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of the investment will vary and is not guaranteed. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures.

IMPORTANT INFORMATION

For investment professionals only. Not for further distribution.
The SICAV Fund is a sub-fund of the T. Rowe Price Funds SICAV, a Luxembourg investment company with variable capital which is registered with Commission de Surveillance du Secteur Financier and which qualifies as an undertaking for collective investment in transferable securities (“UCITS”). Full details of the objectives, investment policies and risks are located in the prospectus which is available with the key investor information documents in English and in an official language of the jurisdictions in which the Funds are registered for public sale, together with the annual and semi-annual reports (together “Fund Documents”). Any decision to invest should be made on the basis of the Fund Documents which are available free of charge from the local representative, local information/paying agent or from authorised distributors and via www.troweprice.com

This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

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Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources’ accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

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