Book Review: “Frontier: Exploring the Top Ten Emerging Markets of Tomorrow”, by Gavin Serkin

A book review by Swen Lorenz

Wiley / Bloomberg Press, GBP 20.39 (Hardcover).

Available on Amazon and on www.frontierfunds.org

Featured in this month’s Master Investor Magazine.

Everyone’s investment strategy is shaped by personal experiences. One of my most lasting experiences was that of visiting Nigeria in 2006. On the look-out for investment opportunities in residential property, I found Nigeria to have the world’s most outstanding residential property opportunity at that time. Anyone who was able to get Western standard apartments built in the country could rent them out for a 50% p.a. rental yield and ask for 2 years’ rent upfront. To my deep regret, I never followed up on this opportunity, and missed Nigeria’s subsequent meteoric rise. If only I hadn’t allowed the look, smell and feel of Lagos to put me off.

That’s why Gavin Serkin’s new book caught my attention. Serkin can draw on two decades’ worth of experience in developing economies through having been the editor of Portfolio International and most recently the head of the emerging markets international desk at Bloomberg News in London. His book, which was introduced at an event in the City just days before we finalised our first issue, is the result of his travelling to many countries that would, first and foremost, be thought of as exotic, remote, or even outright dangerous.

Despite their reputation, Serkin makes a convincing case for these countries, which represent some of the world’s most promising investment opportunities. He points out that over the course of the last 25 years emerging markets have grown from being obscure, exotic countries to representing a major asset class with a market capitalisation in the trillions of Dollars. He now foresees a similar development for countries that are not yet on the list of established emerging markets, but instead count as “frontier” markets – countries like Myanmar, Ghana, Sri Lanka and Egypt.

Frontier markets account for 24% of the world’s land area, 22% of the world’s population, but only 8% of the world’s gross domestic product. There is a gap, and the gap is likely to close. The IMF estimates that by 2017, 12 of the 20 fastest growing countries on earth will be in Africa. These countries generally have little external debt, and often benefit from having unexploited resources.

These frontier markets are also under-researched, which is where the opportunity for investors arises. The book provides a broad range of advice for any investor seriously interested in finding the right investments in these markets, whether that’s locally listed shares, internationally listed shares, or funds. Serkin observes a range of investment approaches and their application. He teaches his readers how to spot opportunities, avoid pitfalls, and minimise risk. The book also contains a useful list of all the stocks and bonds mentioned throughout the individual chapters.

Master Investor rating: Instead of writing from a glass tower, Serkin travelled to all of these countries to experience them first-hand. His book makes not just for a fascinating account of his travels, but is also a useful guide for investors interested in these opportunities.

Win Serkin’s book: On April 30th, we will give away 3 copies of this book among our Facebook community. Friend us on www.facebook.com/masterinvestor for a chance to win a copy.