At Caravan Capital, we assess the world's equity markets along the spectrum of market development. Smaller equity markets are often small either because their economies are underdeveloped, or because the countries themselves are small in terms of land or population. Less developed equity markets are relatively neglected by international investors and sell-side research providers. As such, frontier and emerging markets provide lower valuations, lower correlations to other markets, as well as a lesser degree of market efficiency. We believe that these characteristics provide the opportunity for active investment managers, both to add alpha as well as to mitigate risk.
The frontier and emerging markets exhibit some similar drivers of growth as well as some similar risks, but they are not monolithic. Developing countries pursue different paths to economic development. The paths they take have ramifications for their people, their political development, and for the businesses operating there – but also importantly – for the breadth and quality of opportunities created in their equity markets.
Within this spectrum, from the most exotic frontier markets to the larger emerging markets, we customize our investment research and portfolio construction processes to the unique characteristics of the countries in which we invest. Our Team's combined 50 years of experience in these markets allow us to opportunistically pursue value while navigating the challenges across this broad set of geographies.