Franklin Templeton Frontier Markets Fund to Re-Open, Lured By Immense Undervaluation 1

Franklin Templeton to open its Frontier Markets Fund

Franklin Templeton Frontier Markets Fund (TFMAX) re-opened for investors on May 31, 2017. The fund is up 13.7% year-to-date; 15.6% over the past year as of May 27. Over the last 3 months alone, the fund has gained 9.5%. Once managed by Mark Mobius and Carlos Hardenberg, the fund had soft-closed (to additional investment) in May 2013. Back then, the Franklin Templeton Frontier Markets Fund had an AUM of about $2.12 billion.

As of March 2017, the fund had near $868 million in assets under management. Hardenberg, director of frontier markets at Templeton Emerging Markets Group, will assume the role of lead manager to the fund on its re-opening, with Mark Mobius stepping down from portfolio management duties on a number of Franklin Templeton funds.

Hardenberg sees “immense undervaluation”

The re-opening of the fund to new investment follows the premise that over the years, the stock markets of these frontier (FRN) (FM) economies have opened up by a good measure. While there was previously just a select few sectors open and available to investors, it is a totally different picture now. Frontier capital markets have opened up to new investments, listings, and businesses. There have been many IPOs since 2013, which means there are now more stocks and sectors available in these markets.

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From what Hardenberg told Citywire Selector, “These countries offer more and more diverse investment opportunities to investor…with countries that were not previously investable are slowly becoming investable.” Hardenberg also sees “immense undervaluation” in these markets.

We looked into the forward valuations for frontier markets (FRN) (FM), as compared to the emerging markets (EEM) (VWO), the US (SPY) (IWM), and Europe (VGK) (FEZ). Since the beginning of this year, valuations for the frontier markets have stood below the other three peer groups (see chart above); bolstering the fact that frontier markets are immensely undervalued on a relative basis.

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