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Frontier-Markets Funds Can Range Far and Wide

Gregg Wolper

Gregg Wolper: Now that emerging markets have become an accepted destination for many investors, some are looking to the next level: frontier markets. Those are countries that are considered a little less developed than emerging markets as far as their stock markets, but not all frontier-markets funds are the same. Most of them do own smaller emerging markets as well as frontier markets, but there are differences.

For instance, Harding Loevner, their frontier-markets fund, that has about 15% to 20% of their assets in the Philippines alone. Their number-two holding, Jollibee Foods, which has about 4%--a fast food chain in the Philippines--that stock you won't find at all in Ashmore's version, which is Ashmore Emerging Markets Frontier Equity. That doesn't own Jollibee, and in fact, it only has about 3% in the Philippines--3% versus 15% to 20%.

What does the Ashmore fund own? The Ashmore fund has 10% of assets, a little more, in fact, than 10%, in National Bank of Kuwait, and it has about 17% total in the country of Kuwait. The Harding Loevner fund has some in Kuwait but not nearly that much. There are other differences in country weightings, in sector weightings, in individual stocks, but that captures how different portfolios can be. 

Now, there is one similarity among the funds, and that's, unfortunately, their cost. Both of these funds have expense ratios of about 1.5%, and that's for the institutional shares. They both have Morningstar Analyst Ratings of Neutral, so they're not ideal. But if you're looking for a frontier-markets fund, the most important thing is to look at what they own and how much they cost.