Frontier Funds

As recently reported by The Financial Times, the subprime-driven credit crisis is causing some people to look at frontier markets for unconventional, uncorrelated returns.  As the article notes:

“…Godvig Capital Management’s Babylon Fund, which aims to profit from the rehabilitation of Iraq, is one of a growing band of ‘frontier funds’ which seek returns in everything from North Korean sovereign debt to political change in Cuba. With regard to the latter, the Herzfeld Caribbean Basin Fund has jumped 18 per cent since the announcement of Fidel Castro’s retirement.

…Capturing full exposure is difficult, as frontier markets are usually small and heavily restricted, or even closed. The HCBF targets non-Cuban companies that might do better if the country comes in from the cold. So far, its underlying net asset value has actually slipped slightly since Mr Castro’s departure.  Meanwhile, aggregate market capitalisation for Iraq¹s clutch of traded stocks is less than $2bn and trading volume is very thin. Banks dominate the roster of listed companies, although it is also possible to take a punt on the tufted carpeting industry. About half the Babylon Fund is invested, directly or indirectly, in Iraqi equities. The rest is in Iraqi debt or non-Iraqi equities with some exposure to the country.…”

This entry was posted on Tuesday, March 11th, 2008 at 9:51 pm and is filed under Cuba, Iraq, North Korea.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.