Significant latent value?
Aberdeen Frontier Markets (AFMC)’s manager has been re-positioning the portfolio by reducing exposure to Sub-Saharan Africa, adding companies in new markets and looking capture more of the momentum in markets. There is a now a greater tilt to the Asia Pacific region, where Vietnam accounts for over a quarter of the portfolio. AFMC holds a concentrated selection of companies that offer the prospect of double-digit earnings growth paired with inexpensive valuations (the weighted average current year price/earnings (P/E) ratio of portfolio companies is 10.0x). AFMC exhibits a low correlation with its benchmark as well as to emerging (where 68% of returns can be attributed to moves in the benchmark) and developed (61%) equity markets. The manager feels that a slowdown in the global economy could increase flows into frontier markets (where growth is largely driven by domestic factors) as investors search elsewhere for returns.
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