Plans Look To The New Frontier
Plan sponsors are turning their attention toward frontier markets as emerging markets continue to gain popularity among institutional investors.
The California State Teachers Retirement System will consider a focused frontier approach during its asset study next fiscal year, said Sherry Reser, spokeswoman. It has exposure to equities in Kazakhstan, Lebanon and Colombia through larger mandates. The Kansas Public Employees Retirement System is starting to research the area and Acadian Asset Management recently launched a frontier fund, which now has $157 million under management from 23 investors. Fifteen of them are institutions, including corporate plans, said Churchill Franklin, executive v.p.
Generally, a country is "frontier" if it has an active equities market but low market capitalization and trading volume. About 50 countries are considered frontier markets. Consultants are pushing frontier investing as well. Cynthia Steer, chief research strategist for Rogerscasey has been bullish for some time, but said investors have only recently "gotten it." Ennis Knupp + Associates is starting to do research in the area. It distributed a white paper to all its clients last month that explored the pros and cons of frontier markets. The markets have low correlation, high returns--with corresponding high risk--and many are undergoing regulatory reforms that make it easier for foreign investors to own securities, said Florence Mwaura, senior investment analyst and co-author of the piece.