FREE Site Registration!
Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.

FREE site registration entitles you to:

Exclusive Online Only Content

Free Daily Email News Alerts

Industry White Papers

Asset Management Blogs

   

Retire Rich

By Lee Barney, MMExecutive

October 15, 2007

Intrepid Fund Managers Seek Truly New Frontiers'

It isn't often that mutual fund firms launch remarkable, truly unique new products. Certainly, exchange-traded, lifecycle, 130/30 and emerging-market funds have been among the most significant and popular offerings in recent years.

Earlier this month, Fidelity Investments may have invented yet another new iteration of a mutual fund with its innovative suite of target-date retirement income funds that offer a simplified, one-stop solution many retirees and financial advisers might readily embrace.

The trouble is, once one fund company comes out with a breakthrough, compelling new type of mutual fund, it's inevitably dwarfed by a stampede of imitators-dulling the innovator's original appeal and resulting in a crowded field of indistinguishable commodities.

Now, however, some intrepid emerging-market funds are venturing into a fascinating new territory few others are likely to attempt: investing in such exotic locales as Latvia, Bangladesh, Namibia and the Ivory Coast.

The venture is noteworthy, given that the stock exchanges in some of these places trade fewer than 10 listings. How portfolio managers of these so-called "frontier funds" can reliably research their investments and fairly value them is a mystery, so much so that in next week's issue, we will explore how they accomplish this task in greater detail.

As to why portfolio managers are assuming the additional risks inherent with frontiers that go way beyond those of emerging-markets-including a lack of liquidity, transparency and strong regulations, not to mention wild fluctuations in exchange rates, inflation and the risk of political and social turmoil-some managers say it's simply because the emerging-markets space has become too congested.

"A lot of hidden gems are no longer hidden," Hugh Hunter, head of global emerging markets at WestLB Mellon Asset Management, told The Washington Post. "Clearly, frontier markets are the next tier. We have no option but to go forward in this area."

Others maintain that third-world governments now have the capital to spend heavily on infrastructure.

It's worth taking a look, given that the S&P/IFC Global Frontier Markets Index of 22 frontier nations is up 49% in the 12 months ended Aug. 21, while the S&P 500 is up 16%.

(c) 2007 Money Management Executive and SourceMedia, Inc. All Rights Reserved.

http://www.mmexecutive.com http://www.sourcemedia.com

Recent Posts

Salutations Where Salutations Are Due

The mood at this year's General Membership Meeting of the Investment Company Institute was decidedly upbeat. For good reason. The industry is doing well, having grown net assets by 7% in 2007 and, largely, evading the subprime credit crisis. As well, mutual fund executives, starting with ICI President Paul Schott Stevens, spoke of the industry's vital importance to the American invsetor and our collective and individual fiduciary duties to them.

Add Forensic Testing to the SEC Exam Checklist

At the Securities and Exchange Commission's meeting on April 17 and 18 in Washington, D.C., open only to chief compliance officers, SEC chief examiner Gene Gohlke announced that mutual funds can now add forensic testing to their SEC exam checklist of funds' own annual internal compliance reviews. If an asset management firm has not conducted forensic testing, it runs the risk of being found deficient.

Index of Posts

Post a Comment

You must be registered and logged in to post a comment. Click here to register.

Reader Comments

Be the first to comment.

Lee Barney

Lee Barney has been writing about Wall Street since 1993, the past six years as editor of Money Management Executive and Retirement Income Reporter. Previously, at United Media’s Wall Street & Technology magazine and Risk/Waters Information Services, she covered financial IT. For TheStreet.com, she wrote the daily “Meet the Street” column covering a broad spectrum of market-moving events. Lee began her career as a reporter in Tokyo with The Japan Times and was executive editor of Spotlight magazine.

Related Items