Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Multi-country / Frontier investing

with 3 comments

Frontier markets matter because they have disproportionately low levels of income relative to human potential and intelligence. The expansion of per capita requires stable political regime. Mean reversion. No breakthrough or discovery is awaited unlike the developed world. Per capita can go up 10-20-30X by replicating models from other successful countries.

In 2014, Argentinians consumed the most soft drinks per capita in the world, 156 litres. Coca-Cola’s CEO pledged to invest $1 billion in Argentina over a four-year period starting in 2016.

You can imagine in your mental eye, Buffett salivating over a can of cherry coke. (Soda is harmful for good health. Do not forget the base rates and sample size when citing Buffett age 86 consuming 6 can of cokes daily).






Benefits of Frontier market investing

  • Frontier markets are where emerging markets were in 1990s. A lot of them are close to high single digit growth and can easily go up to double digit GDP growth rates.
  • Some of these markets are depending on single commodity, Nigeria on Oil, I lost a little here in 2015.
  • 3.5 Analysts per equity (for very large companies) vs 20 analysts per equity for Emerging country.
  • Hidden Gems – According to the index provider MSCI, emerging markets made up approximately 1% of global market capitalization 30 years ago. By 2015, emerging markets had increased to nearly 10%. Similarly, frontier markets in 2015 made up less than 1% of global market capitalization and could follow a similar growth trajectory. While they are becoming popular with family offices, frontier markets are still relatively undiscovered by most retail investors, with only a handful of mutual funds currently available
  • Uniqueness brings diversification. Six stock portfolio in a single country not the same as six stock portfolio in six countries. Not only do frontier markets have low correlations with developed and emerging markets, but they have very little correlations amongst each other as well. Individual frontier market countries are quite distinct from each other. For example, Kuwait is one of the larger countries in the frontier market index, and is classified as a high income country by the World Bank, while another large index country, Nigeria, is classified as lower middle income. The issues are impacting Nigeria today due to low oil prices have very little impact on Argentina or Pakistan, and investing in a broad range of frontier markets reduces the volatility and risk of investing in any individual frontier market in isolation. Argentina has just been through a major election and is in the process of enacting sweeping political reforms.
  • Frontier today, emerging tomorrow. While frontier markets are risky, many are now in periods of relative stability, with political reform and greater democracy allowing for further development and investment in infrastructure and a more favorable business environment for investors. Frontier markets typically trade at cheaper valuations than their more developed peers and have higher dividend yield. The support of population and policy should translate into stronger GDP growth for frontier markets. The ultimate path for a frontier market is to grow into an emerging market. Both the United Arab Emirates and Qatar recently graduated from frontier to emerging market status.

         China was a frontier market in 1970, today it is second largest economy.

         Similarly most frontier markets will be middle income countries by 2040.

  • Lack of liquidity: Liquidity is an important issue for investors in frontier markets. Companies tend to have more restrictions on foreign investors, and trading volume is much lower than in developed markets or emerging markets. This can make both entering and exiting positions more challenging, especially in times of market stress. This is an asset class where patience is necessary to capitalize on the long term theme. This is a positive for small investors.


  • One can run the risk of being too early.
  • They are volatile, lack liquidity. This can be looked at positively.
  • Political regime
  • Currency


Frontier FTSE classification


FTSE Frontier classification

Low correlation with frontier markets:


Frontier markets have low correlation with other markets

The 5 year correlation (using monthly index returns) was 0.87 as of June 30th 2014. Frontier Markets, on the other hand, remain more local in character, heavily driven by internal economic and political dynamics. The 5 year correlation of the FTSE Frontier Index with the FTSE Developed All Cap and Emerging All Cap indices remain relatively low at 0.58 and 0.52 respectively as of June 30th 2014. Furthermore, Frontier Markets have relatively low correlations amongst each other. This is highlighted by cross-country correlation between Frontier Markets of 0.30 compared with 0.52 for Emerging and 0.70 for Developed. Thus, a Frontier Markets Index offers diversification and low correlation to other asset classes held in a typical index.

Labour Force – Advantage Frontier


Urbanisation – Frontier Trumps Emerging


Investors love poverty not because of masochism but optimism regarding it reversal.


Contrarian Strategy

Which ever frontier market is hammered down, one can take a position before the institutions. (eg: Cadbury Nigeria, GSK Nigeria, Unilever Nigeria are down 60-85% from their Peaks). You do not have to agree with the crowd or institutions. Make your own path. For inspiration read Einstein’s rejection letter. Einstein was Berned Out, ironically he succeeded and this image has a postal stamp next to it for greater contrast effect. (Letter translated to English) (Stay true to your inner compass. Science or other people cannot understand you completely. Eg: “you are soul, you are soul”, and leaving to fate without personal concerted effort while being alive you will be born a million trillion times again and again in human or other physical body type, I don’t have to seek advice / opinion, I know it to be the case, it is the Truth as per every scripture and experience of the evolved person).


Professor Wilhelm: The Universe is more strange than we “can” imagine


Think Long Term

Benefits of multi country investing:

  • Automatic prevention of foolish decisions of over concentration (It takes time to repatriate funds plus one incurs higher transaction costs). Instills disciple – protects from bias.
  • Less correlation among equities.
  • Suitable for long term multi generational scenario.
  • Its a risk to assume that a single country would do well over your/your children’s lifetime.

More stable at the base of the Pyramid ( For Anti-fragile, Black Swan resilient portfolio)

More stable.png


After everything is said and done, more is said than done. I am the only person I know who is focussed on investing yet has watched CNBC less than 10 days in the previous 10 years. People talk but don’t pull the trigger. Some folks sell mutual funds but do not invest in them, some run mutual funds but do not own substantial position in their own fund, some news readers talk about stock (500 a year) and hardly, if ever invest in them. We really believe in multi country, multi generational investing and let the skin in the game do the speaking.


Last but not least, I will ensnare you with an Authority Bias, although there are reasons that Prof. Bakshi is trying to help me, but he also believes in investing in more than a single country, and have provided me with the opportunity to invest for him in countries outside India.

Prof. Bakshi – Leading Value Investor and Teacher

Disclosure: Views are personal notions and do not represent any organisation or company. Investment in stock market can (and many a times do) result in loss of principal capital.

References: Forbes, FTSE


Written by amitdipsite

September 9, 2016 at 10:30 pm

Posted in Uncategorized

3 Responses

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  1. Superb post, Amit. Frontier will surely become Emerging – inevitable transformation of their economies. Just needs a LOT of patience.
    Your macro posts like this are just fantastic, as are the extremely interesting companies you profile sometimes in these Frontier markets.

    What is your sense on Cadbury in Nigeria? I took a cursorily look a few months ago & felt they may not as strong a franchise as one would expect.. Or put differently, GSK & Unilever are much stronger businesses even in a weak macro picture for their economy than Cadbury.

    I chanced upon RealVisionTV recently, and think you’d love it. It is a fantastic platform that offers lots of very valuable interviews with fund managers across the world. The one video that reminded me most of the kind of work you are doing is a 2015 video titled “Monsoon” – there’s a 7-day free trial to the platform (no CC required) & that covered a few other Frontier markets as well (Iran being one of the most interesting on that list)

    There’s a point in that video where they refer to a certain very-favorable geographical area – parts of Africa, Tanzania for example – which are in a true macro “sweet spot” as far as resources, healthy soil, monsoons etc are concerned. I don’t know anyone who has studied Africa as much in depth as you have, so would welcome your thoughts on this presentation.

    Thanks again for sharing all the valuable commentary! It is really a one-of-a-kind reading that simply doesn’t exist elsewhere.


    September 15, 2016 at 5:11 pm

    • Thanks for sharing the link to RealVisionTV, will check out

      GSK Nigeria is hopeless now, after selling out 50% revenue earning business to Suntory

      Unilever is struggling.

      Cadbury is actually better placed, but Nigeria is in a lot of pain, so not entering this market yet.



      September 16, 2016 at 12:24 pm

  2. […] I wrote about it here that the more lower in the Pyramid, the stable your journey […]

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