Whatever happened to frontier markets?

Merrill Lynch’s international investment strategist Michael Hartnett posed the question in a report released on Tuesday, in which he noted, inter alia:

For much of the decade Frontier markets were an uncorrelated, outperforming asset class.

- Between 2000 and 2008, the Frontier market index had a low 32% correlation with the S&P 500, compared with 78% for Emerging Markets
(EM) and 86% for Developed Markets.

- Between January 2000 and August 2008, annualized returns from Frontier Markets were 19% versus 8% from Emerging Markets.

- And the perceived risks from Frontier markets were falling thanks to policy improvements - external debt as a share of GDP fell in almost all regions , most dramatically in Africa from 70% to 14% in Africa