"Of Mutual Interest"- Penelope Wang of Money Magazine
Tuesday, July 22, 2008PAUL KANGAS: In tonight's "Of Mutual Interest" segment, boldly going where few investors have gone before -- into what are called frontier markets. Joining us now to explain what they are and whether you should invest in mutual funds in frontier markets is Penelope Wang, senior writer at "Money" magazine.. Penny, welcome to NIGHTLY BUSINESS REPORT.
PENELOPE WANG, SENIOR WRITER, MONEY MAGAZINE: It's great to be here, Paul.
KANGAS: So just what are frontier markets?
WANG: Well, frontier markets are small, fast-growing countries that don't yet qualify for emerging market status, but they have new stock markets, new companies to invest in and they can be found all over the world, especially in Africa and Asia, Latin America and eastern Europe.
KANGAS: What kinds of companies are putting together mutual funds that invest in these markets?
WANG: Well, there are a number of funds and ETFs on the drawing board. But two companies that have already come out with funds that invest primarily in frontier markets are T. Rowe Price and Fidelity.
KANGAS: I think let's have a chart of T. Rowe Price. There we go. The symbol is TRAMX, correct?
WANG: That's right.
KANGAS: And it's had a pretty good move up, hasn't it?
WANG: Yeah. It's had quite a run. It's been up I guess since it launched in September almost 30 percent or so and for the year, it's up 1 percent, which doesn't sound great, but in this market it really is.
KANGAS: Let's have a look at that second selection of yours and we have a chart on it. It's a relatively new frontier investment, Fidelity adviser emerging markets (FEMEX).
WANG: That fund just launched in May. So there's really not much of a track record there yet.
KANGAS: Right. Now, are these pure plays for frontier countries only?
WANG: Well, no, actually, these funds invest in emerging markets, as well as frontier markets. Again, part of the problem is that it's tough to find liquidity in some of these smaller countries, so they hold pretty big stakes in for example some of the Gulf states have banks and financial services companies and they account for a good portion of their portfolio.
KANGAS: We just have 30 seconds left, but are these types of funds for all investors?
WANG: Absolutely not. Though it may sound enticing to want to get in on the ground floor of the next China or India, these are very risky funds and you have to have a very long time horizon and a pretty high tolerance for risk before you consider investing in them. So you should think of them for only a very small portion of your portfolio, if at all.
KANGAS: Very interesting Information and I want to thank you for joining us tonight, Penny.
WANG: Thank you, Paul.
KANGAS: Our "Of Mutual Interest" guest tonight, Penny Wang, senior writer for "Money" magazine.
