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Baht/$ 33.35/39
Bid/Ask
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GOLD |
14,650
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NETWorth
ANDREW WOOD
Africa and India were often referred to as "the jewels in the crown" during the days of the British Empire because of their natural resource wealth and the abundance of precious gems and industrial diamonds. But are frontier market investments right for cautious investors, or are they best left to rough diamonds with a wild-west attitude for adventurous trading?
Investors rushing into the traditional Global Emerging Markets (GEM) countries of Russia, China, India and resurgent Latin America, often overlook Africa. But the winds of change have been blowing since 2004 in some parts with steady year-on-year growth. Gemstones and precious metals always tend to boom in bear markets and can be useful hedge-bet investments.
In recent times the mining of tanzanite and emeralds has seen a great deal of success. Production levels of the rare blue gemstone, tanzanite, have risen significantly near Mount Kilimanjaro. Here winds of change are indeed blowing as Masai tribesmen arrive on motorbikes carrying their mobile phones instead of spears and shields.
There has been a cascade effect in the growth of local trade economies, especially in motorbikes, mobile phones, and tartan robes. The need to communicate business deals through networks rather than using the bush telegraph system has resulted in some of the biggest movers in broadband knocking on the doors of Tanzania and Kenya, British Telecom and Virgin being prime examples.
The frontier markets through GEM and Global Commodity Funds (GCFs) can be scary for risk-averse investors. Then again, these areas should not be unduly feared or ignored. If researched diligently when one considers how to optimise a well-balanced portfolio, this invariably means including a modest allocation devoted to growth sectors.
Incubating growth funds while mitigating portfolio risks: As we have always cautioned, the best way to spread risk, mitigate tax liability, protect inheritances and substantially reduce excess expenses is to wrap investments in international personal portfolio bond vehicles structured to best suit each expat national and their particular family circumstance.
These vehicles are singularly advantageous when acquiring all manner of securities as they can trade practically all of the global market sectors no matter where you are domiciled or relocated in the future. They are extremely useful to high net worth individuals with tax issue considerations to negate. These exchange trades embrace listed companies, funds, bonds, shares, mutuals and most suitably listed securities globally from New York to New Zealand, or Argentina to the African heartlands.
Investing into frontier markets for growth does not mean that prudent investors have to allocate capital sums for the long term. Professionally structured trading vehicles allow investors to trade daily in global markets resulting in both unit allocation accruals and dividend distributions. These trades can be conducted in differing ways as best advised or personally dictated:
- self-investor portfolio dealings: Bond owners confident enough to trade the markets can do so in their own right. They can also nominate or confer equal rights to family members, trustees or corporate partners.
- Dedicated investment advisers: Along similar lines, investors can appoint institutional in house financial brokers, onshore stock traders or independent market specialists as their authorised portfolio managers. There are no additional costs involved in such strategies.
FPersonalised asset management options: Bonds and portfolio structuring can also be delegated to the hands of expert fund and asset managers. There will be a cost, usually of 1% annually, to consider, in exchange for managing assets to predetermined levels of return at mutually agreed risk levels.
Expats with aversion to market volatility looking for comfortable rides over a year or more can tap prime opportunities in this field by investing in institutional gainers that make collectively pooled investment fund decisions on their behalf. These funds-of-funds spread risk and allocations across countries, industry sectors and non correlated economies for optimum returns and risk reduced diversity.
Some of these heavyweight fund of fund specialists provide capital returns to smart investors buying into these securities at preferred terms via trading bonds. Some fund managers spreads risk for optimal returns across South Africa, Morocco, Egypt and emerging European markets, for instance. Others may concentrate somewhat on more regional areas such as a Heart of Africa specialist using hedged tactics to exploit bear market conditions now in motion.
People visit Africa for its wealth and cultural diversity and a chance to spot the Big Five game animals roaming free. This creates investment opportunities in tourism-related markets as a further option. Just as you wouldn't enter the bush without an experienced guide, investors should not enter frontier markets without expert advisers to guide them safely through the exchange jungles to pre-empt bear attacks. In paying prudent attention to the dangers involved, neither should you lose sight of the dividends payable either, for you could be much richer for the experience.
Questions to the author can be directed to Barclay Spencer International on 0-2653-1971 or e-mail to info@barclayspencer.com
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