10 Years of Investing in Frontier Opportunities: Celebrating the East Capital Global Frontier Markets fund “The best is yet to come”
Exactly 10 years ago, in December 2014, we launched our first global strategy, the East Capital Global Frontier Markets, with a simple idea: to invest in the best companies in the world’s fastest-growing yet most overlooked markets.
Despite the ever-changing news flow (think about Trump 1.0, oil prices, geopolitics, Covid, currency volatility, and many other developments) and the completely different economic cycles across 25+ countries, our strategy has delivered significantly better returns than major emerging and frontier market indices on a rolling 1-, 3-, 5-, and 10-year basis (gross alpha of ~70% vs. MSCI Emerging Markets and ~90% vs. MSCI Frontier Markets total return indices since inception 10 years ago).
Even though it’s a complex universe that the average investor tends to ask “what-about” questions, focus on hypothetical scenarios and often overlook, the investment case is built on 3 easy-to-understand dynamics:
- High earnings growth: ~15% annual earnings growth driven by high economic growth
- Low volatility: Due to low and even negative correlations for structural reasons
- Attractive valuations: Key multiples typically at a deep discount to emerging and developed peers
You can’t judge a book by its cover: there’s no substitute for being on the ground and identifying what truly drives these markets to offer differentiated opportunities. As has been the case in the past 10 years, cyclical episodes will come and go, but structural growth stories should remain intact. Despite the catchy headlines, good companies will always find ways to grow in the fertile grounds of the promising frontiers across Vietnam, Egypt, Nigeria, Romania, Pakistan, Kenya, Kazakhstan, Georgia, Bangladesh, Morocco, and Sri Lanka.
This is why we dare to say, once again, “the best is yet to come” as we plan for the next 10 years.
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