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Asia Frontier Capital Lt a fund management company managing equities in Asian frontier

Post on: 13 Май, 2015 No Comment

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Challenges are what make life interesting and

overcoming them is what makes life meaningful

- Joshua J. Marine

In February 2015, the AFC Asia Frontier Fund returned –0.3% and the AFC Vietnam Fund returned +1.8% bringing returns since inception to +36.9% and +38.6% respectively. The MSCI Frontier Asia Index (-1.0%) saw a slide as there was selling pressure in the heavily index-weighted Pakistan. At the same time the MSCI Frontier Index (+2.9%) and MSCI World Index (+5.7%) saw significant rallies. In Vietnam, there was an upward movement in the markets lead by a rally in the banking sector with the Ho Chi Minh VN Index (+2.9%) and Hanoi VH Index (+0.3%) ending the month up.

Looking around the world there have been several developments that could lead to some market movements in 2015. Last month there was positive economic news out of the US after the latest unemployment figures were released. The unemployment rate dropped to 5.5% which is the lowest it has been in the US since May 2008. With the continued low oil price keeping money in consumers’ pockets and helping to keep inflation in check, this could potentially be a catalyst to see 2015 become the year that the US Federal Reserve finally stops tapering and raises interest rates. With this in mind, it is important to ensure that your portfolio in 2015 contains assets that will be more resilient to market volatility or downturns should there be an economic shock from rising interest rates in the US.

The easiest way to do this is through diversification into asset classes that have low correlations with each other. The AFC Asia Frontier Fund has maintained its low correlation to the MSCI World Index and MSCI Emerging Markets Index of only 0.27 and 0.24 since inception and we have previously seen similarly low numbers when running them against other asset classes (such as US real estate). It may also be surprising to find out that since the first announcement of tapering, in May 2013, the correlation has been negative with the MSCI World Index and MSCI Emerging Markets Index standing at -0.26 and -0.24 respectively. For a flashback to Thomas Hugger’s CNBC interview on this topic from August 2013, please click here.

Speaking with our clients, our funds are becoming increasingly popular as a means to diversify clients’ overall portfolios. There have also been continued investment inflows this month and we would like to extend a warm welcome to all of our new investors.