Global Frontier Markets
The Caravan Capital approach to the global frontier markets is opportunistic and value-focused. The Caravan frontier process is oriented from the top-down, utilizing quantitative and qualitative fundamental analysis to actively select countries and companies. We assess valuations relative to fundamental quality and growth potential, focusing on drivers of the markets' long-term recognition of firm value. It is Caravan's belief that the weak state of market efficiency present in many frontier markets provides opportunities for experienced, active investors that conduct rigorous fundamental research. The scarcity of foreign capital and sell-side research in the frontier markets provides particular opportunities, in our view, for the discovery of hidden value.
The Caravan Capital approach to global frontier markets includes "exotic" frontier markets, defined as those countries excluded from even the frontier market benchmark indices. While small and illiquid markets, many exotic frontiers tend to offer compellingly low correlations, low valuations, and a weak state of market efficiency. The approach also employs focused, relational activism to encourage firms to make improvements to reporting, investor relations, and corporate governance with the intent to facilitate the market's discovery of intrinsic value.
Caravan manages portfolios using a disciplined portfolio construction process. Our approach is broadly diversified to take advantage of the breadth of opportunity as well as the risk-mitigating potential of the low correlations present in the frontier markets. Portfolios are rebalanced actively in an attempt to capture the upside from the excess volatility present in individual frontier markets.
At Caravan, we take the long view. We believe that the growth and return potential of the frontier markets can be best captured over a long time horizon.