Frontier market managers have said their benchmarks are becoming "increasingly irrelevant" as major index constituents get upgraded to emerging markets, with implications noted for passive investors in the region.
Managers are also concerned about increasing concentration risk following the upgrades, due to a shortage of markets mature enough to be given frontier status and replace incumbents. Frontier markets are upgraded when they have met requirements on four factors: ease of capital flows, openness to foreign ownership, stability of institutional framework, and efficiency of operational framework. MSCI also looks at areas such as market entry, organisation and infrastructure. Sector promotion In May 2014, MSCI promoted UAE and Qatar to emerging markets status, heavily impacting the Fronti...
To continue reading this article...
Join Investment Week for free
Signup and gain exclusive members-only insights - all free of charge!
- Unlimited access to real-time news, analysis and opinion from the investment industry, including the Sustainable Hub covering fund news from the ESG space
- Get ahead of regulatory and technological changes affecting fund management
- Important and breaking news stories selected by the editors delivered straight to your inbox each day
- Weekly members-only newsletter with exclusive opinion pieces from leading industry experts
- Be the first to hear about our extensive events schedule and awards programmes
