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I am relatively new to investing (using Hargreaves Lansdown) and have built a portfolio of low cost index tracker funds. Given my age (27) I have opted for more risky assets (i.e. my portfolio is skewed towards emerging markets) with the idea that I can wait out any market turbulence.

I recently read about frontier markets and thought they would be a great addition if I could find a low cost way to invest in them. However, there appears to be no index tracker funds (at least on HL). I have read a bit about ETFs for frontier markets and have found other frontier market funds but they have much higher costs than index tracker funds and go against my strategy of paying as little as possible.

Am I right in saying there aren't any index tracker funds for frontier markets? If that is true, what is the reason for this and could there potentially be some index tracker funds for frontier markets in the future?

dippynark
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  • On my first search on the FT I found one from Blackrock UK so they do exist: https://markets.ft.com/data/investment-trust/tearsheet/profile?s=BRFI:LSE but it depends on which index you are interested in. – MD-Tech Dec 08 '20 at 13:43
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    https://markets.ft.com/data/etfs/tearsheet/summary?s=FM:PCQ:USD tracks the MSCI Frontier Markets Index too. – MD-Tech Dec 08 '20 at 13:46
  • Although they both track the right kind of index, they are traded as shares according to HL (https://www.hl.co.uk/shares/shares-search-results/b/blackrock-frontiers-investment-tst-ord-1p, https://www.hl.co.uk/shares/shares-search-results/i/ishares-inc-msci-frontier-100-fund) which I believe would make them ETFs and as such would incur the share dealing charges (https://www.hl.co.uk/shares/share-dealing/dealing-charges) which I was trying to avoid -- potentially the question is worded inaccurately, but I was hoping to find something like Vanguard Emerging Markets Stock Index but for frontiers – dippynark Dec 08 '20 at 14:21
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    no issue with the question I just skipped an important part – MD-Tech Dec 08 '20 at 14:43
  • @dippynark do you mean that you only want mutual funds? It doesn't say in your Q that you want to avoid all ETFs. Both ETFs and mutual funds can be index tracking ("passive") funds. – BrtH Dec 10 '20 at 08:50
  • Yeah I think so reading the definition of a mutual fund, and it looks like HLs definition of a fund aligns with mutual fund (whereas ETFs are in the shares section) -- I basically want to invest in frontier markets, spread over a range of companies, but with minimal fees and with room to experiment (e.g. ETFs investment charge means I would end up spending a lot if I kept tweaking stuff). I think I could have put this in a better way than I have – dippynark Dec 10 '20 at 11:28

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As indexes effectively buy blind they are exceptionally difficult to run in frontier markets where rates of fraud are high, liquidity/security/corporate governance are all very poor, and you often face highly volatile government and legal systems.

All of these make for a world that is very easy to exploit for unscrupulous players in the face of large foreign capital inflows buying at any market price.

These types of markets you really need boots on the ground and a manager who is able to be much more selective about who to deal with and work out where the fraud is and who/what you can trust etc.

Philip
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