GLOBAL - HSBC Global Asset Management has launched a New Frontiers fund to institutional investors.
Nannini said frontier markets had become popular over the past few years as increasing investment in 'traditional' emerging markets made opportunities more difficult to find in places such as China and India.
"Everybody made their money in emerging markets over the last ten years. It's becoming more and more difficult to find alpha and excess returns in these markets. It was clear about three years ago how important frontier markets were becoming," he said.
Nannini pointed to favourable demographics, robust commodity prices and increasing inflows of capital and technology from the developed world as factors fueling growth in this sector.
The New Frontiers fund contains 60-90 stocks taken from a range of countries across sub-Saharan Africa, the Middle East and Eastern Europe.
The fund has a strong bias towards the financial sector (58%) and limits of 10% of the total fund portfolio in any one stock and 15% in any one country.
To be eligible for inclusion in the fund, companies must have a market cap of at least US$50m, although Nannini said the fund was looking at unlisted companies in pre-IPO stages.
Due to the illiquid nature of the markets involved, HSBC said the fund had limited capacity of US$500m with $300m already allocated.
Minimum allocations for institutional investors were set at $5m.
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