While headlines fixate on tech giants, a quieter revolution is unfolding in the world’s frontier markets.
What is a frontier market & why do they matter?
Think of frontier markets like the early stages of a bustling new neighborhood. The big cities (developed markets) are already crowded and expensive, and even the trendy suburbs (emerging markets) are getting pricey. But just beyond, there’s a vibrant district taking shape – full of energy, new businesses, and untapped potential. It’s not without its quirks: the roads aren’t fully paved, and the infrastructure is still being built. But for those willing to explore early, there’s the possibility to secure prime spots before the rest of the world catches on.
In our view, these smaller economies are growing at a fast pace and can be powered by youthful populations, rising consumer demand, and improving governance, now reinforced by global shifts such as re-shoring and near-shoring [1] that bring production closer to end markets. Because they’re often overlooked, inefficiencies abound, giving experienced active managers room to try and uncover under researched leaders early.
For portfolios, frontier markets can add differentiated return streams with lower correlation to mainstream equities, plus a potential income kicker: many well managed businesses combine strong cash generation with a focus on shareholder returns. For context, the MSCI Frontier Markets Index returned 66.0% over the last five years [2], compared to 29.0% for the MSCI Emerging Markets Index [3] (figures on a total return GBP basis, with income reinvested, as at end-July 2025).
Monthly returns (%) – figures on a total return GBP basis, with income reinvested, as at end-July 2025
| Date | MSCI Frontier Markets Index | MSCI Emerging Markets Index |
| 7/31/2024 | 0.2% | -1.3% |
| 8/31/2024 | -0.3% | -0.7% |
| 9/30/2024 | -1.4% | 4.5% |
| 10/31/2024 | 3.7% | -0.3% |
| 11/30/2024 | 0.4% | -2.5% |
| 12/31/2024 | 1.7% | 1.3% |
| 1/31/2025 | 3.8% | 2.6% |
| 2/28/2025 | 0.5% | -0.8% |
| 3/31/2025 | 0.3% | -1.8% |
| 4/30/2025 | -4.5% | -2.1% |
| 5/31/2025 | 5.6% | 3.3% |
| 6/30/2025 | 3.8% | 4.3% |
| 7/31/2025 | 10.6% | 5.6% |
The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index
Individually, these markets can be volatile; but blended thoughtfully, they have the potential to deliver a balanced. In our view, valuations are still modest [4] and macro fundamentals [5] are improving in many countries. This presents a compelling moment to look beyond the usual suspects.
Downside management – Risk management cannot fully eliminate the risk of investment loss.
Why should investors consider investing in frontier markets now?
After a decade of flows into the same global leaders, many portfolios have become narrowly concentrated by geography, sector and style. Frontier and smaller emerging markets have long been overlooked by global investors, leading to a range of valuation anomalies. The team’s investment process is specifically built to identify and actively capture these opportunities, combining deep research, careful stock selection, and a global perspective to capitalise on these anomalies. The returns in these economies are often driven by domestic reforms, local credit cycles and company execution rather than US growth or mega cap tech earnings alone – meaning they can behave differently and could add genuine diversification to a broader equity allocation.
Research capabilities – There is no guarantee that research capabilities will contribute to a positive investment outcome.
Diversification – Diversification and asset allocation may not fully protect you from market risk.
Exploit market inefficiencies
Just as importantly, these frontier and smaller emerging markets offer another key advantage for active investors: they can be inefficient. We seek to exploit these inefficiencies compare trends across countries and sectors, policy cycles, credit turns, supply chain shifts, rather than analysing markets in isolation, redeploying capital where the balance of probabilities is improving. The investment process is purpose built for this terrain: on the ground due diligence, a rigorous country level framework, and a disciplined approach to stock selection aim to identify resilient businesses early as fundamentals improve. This edge has been evident in 2025 (to end July), with strong contributions from smaller markets where exposure has been rising, including Pakistan, Turkey, and Bangladesh (Source: BlackRock, as at end July 2025).
Changing global landscape
Meanwhile, global geopolitical tension is another structural trend that can benefit some of these markets. As supply chains are re-diversified and companies pursue resilience through re-shoring and near-shoring, capital and trade are rerouting – not away from globalisation, but toward a different flavour of it. Within our s universe, that is creating local champions in markets where policy, demographics and investment cycles are turning more supportive. The team’s process is explicitly built to identify these turning points and seeks to align bottom-up ideas with favourable country cycles.
Put together, this could be an opportunity to solve concentration, harvest inefficiency through stock picking, and benefit from evolving global trade patterns—while constructing a portfolio whose return drivers are less tied to the same crowded drivers. Additionally, structural growth in many frontier and smaller emerging economies could provide a powerful backdrop for well run businesses to thrive. BRFI’s differentiated opportunity set is not just about cyclical rebounds, but about tapping into long term trends that could underpin resilient business models and sustainable earnings growth.
Risk Warnings
Investors should refer to the prospectus or offering documentation for the funds full list of risks.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time and depend on personal individual circumstances.
Fund-specific risks
BlackRock Frontiers Investment Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Frontier Markets, Gearing Risk
Description of Fund Risks
Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.
Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater ‘Liquidity Risk’, restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.
Frontier Markets: Frontier markets are generally more sensitive to economic and political conditions than developed and emerging markets. Other factors include greater ‘Liquidity Risk’, restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund. There may be larger fluctuations to the value of your investment and increased risk of losing your capital.
Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
By Emily Fletcher, co-portfolio manager, BlackRock Frontiers Investment Trust
[1] Re-shoring is the process of bringing production back to the company’s home country, while near-shoring involves moving operations to a nearby country, often to reduce costs while staying geographically close.
[2] MSCI Frontier Markets Index, July 2025
[3] MSCI Emerging Markets Index, July 2025
[4] Modet valuations mean that asset prices are relatively low or reasonable compared to their earnings potential or historical averages—suggesting they may offer good value for investors.
[5] Macro fundamentals refer to broad economic indicators like GDP growth, inflation, interest rates, and employment levels. Improving fundamentals signal a healthier economic environment that can support market growth.
