Wasatch Funds has launched one of the few no-load open-end mutual funds focused exclusively on frontier and smaller emerging market countries. The Wasatch Frontier Emerging Small Countries Fund (WAFMX) was launched January 31st and will begin a wider roll out on March 5th with the addition of the Fund to the Schwab, Fidelity and TD Ameritrade platforms for investors. The Fund is managed by veteran international investor Laura Geritz, who is also a portfolio manager of the Wasatch Emerging Markets Small Cap Fund with Roger Edgley. Edgley, Director of International Research at Wasatch Advisors, has built an experienced team of analysts and portfolio managers since he joined the firm 11 years ago.
“We believe equity investing in frontier market countries and the smallest countries within the traditional emerging markets indices represents a vast potential growth opportunity for fundamental investors,” said Edgley. Geritz, the new Fund’s portfolio manager, added, “The investment opportunity is driven by the macroeconomic and demographic characteristics of many of these countries including high gross domestic product (GDP) growth relative to developed economies, powerful demographic factors such as young and growing populations, and liquidity and foreign investment flows that drive returns in their equity markets. Frontier markets are also historically less correlated to developed markets offering a potential diversification benefit for investors.”
From an index perspective, the MSCI Frontier Markets Index, one of the benchmarks for the Fund, is comprised of 25 countries. The chart below gives a partial list of the countries identified and/or visited by the International Equity Team at Wasatch, which the team defines as Frontier Markets/Smaller Emerging Markets:
|Index-listed Frontier||Non-Index-listed Frontier||Emerging Small|
|Trinidad and Tobago|
Source: MSCI, S&P, Wasatch Advisors as of 1/31/12.
Note: Wasatch Advisors may include additional countries from Frontier and other Emerging Markets, as it defines them in the Principal Strategies section of the Fund prospectus.
The Wasatch Frontier Emerging Small Countries Fund will also invest in smaller emerging markets that the team believes have similar characteristics to frontier markets, and which open up the investing universe to include even more companies. Wasatch considers a “small emerging market country” to be any country that individually constitutes no more than 7% of the MSCI Emerging Markets Index or the S&P Emerging Markets Broad Market Index (BMI).
Commented lead portfolio manager Laura Geritz, “We believe our fundamental research approach at Wasatch applies well in these markets. We travel extensively and have met with many companies in smaller emerging markets. We also have made research trips to frontier markets in Africa and Southeast Asia to visit companies. Our forays lead us to believe that we can find fast growing businesses that meet our quality standards and invest in them at attractive valuations.”
Wasatch Advisors expects the Wasatch Frontier Emerging Small Countries Fund to be capacity-constrained and reserves the right, per the Fund prospectus, to close the Fund to new investors at any time with the goal of protecting the interests of existing shareholders.
For more information about the investment opportunity in frontier markets, click here for the Wasatch white paper Frontier Markets and Emerging Small Countries: Elements of an Emerging Asset Class.
About Wasatch Advisors®
Wasatch Advisors is the investment advisor to Wasatch Funds,® a family of no-load mutual funds, as well as to separately managed institutional and individual portfolios. Wasatch Advisors pursues a disciplined approach to investing, focused on bottom-up, fundamental analysis to develop a deep understanding of the investment potential of individual companies. In making investment decisions, Wasatch’s portfolio managers employ a uniquely collaborative process to leverage the knowledge and skill of the entire Wasatch research team. Wasatch Advisors is an employee-owned investment advisor founded in 1975 and headquartered in Salt Lake City, Utah. Total assets under management at 12/31/11 were $10.2 billion.
Investing in small cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds. Investing in foreign securities, especially in frontier and emerging markets, entails special risks, such as unstable currencies, highly volatile securities markets and political and social instability, which are described in more detail in the prospectus. Being non-diversified, WAFMX can invest a larger portion of its assets in the stocks of a limited number of companies than a diversified fund. Non-diversification increases the risk of loss to the Fund if the values of these securities decline.
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, containing this and other information, visit www.wasatchfunds.com or call 800.551.1700. Please read it carefully before investing.
The investment objective of the Wasatch Frontier Emerging Small Countries Fund (WAFMX) is long-term growth of capital.
Correlation indicates the strength and direction of a linear relationship between two investments.
GDP (Gross Domestic Product) is the monetary value of all the finished goods and services produced within a country’s borders annually.
The MSCI Frontier Markets Index is a free float-adjusted market capitalization index designed to measure the equity market performance of frontier markets. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index designed to measure the equity market performance of global emerging markets. The S&P Emerging Markets BMI captures all companies domiciled in emerging markets within the S&P Global BMI with a float-adjusted market capitalization of at least US$100 million and a minimum annual trading liquidity of US$50 million. You cannot invest directly in these or other indices.
© 2012 Wasatch Funds. All rights reserved. Wasatch Funds are distributed by ALPS Distributors, Inc. (ADI). Separately Managed Accounts and related investment advisory services are provided by Wasatch Advisors, a federally regulated investment advisor. ADI is not affiliated with Schwab, Fidelity, TD Ameritrade, or Wasatch Advisors. Gene Podsiadlo is a registered principal of ADI.