In the latest Q&A article and podcast from Fund Calibre, Frontier Markets Equity fund manager – Johannes Loefstrand at T. Rowe Price, shares his insights around frontier markets representing a fascinating blend of growth, inefficiency and opportunity.
Frontier markets, those countries outside both developed and emerging markets, offer investors access to dynamic companies and compelling growth potential. T. Rowe Price Frontier Markets Equity fund manager Johannes Loefstrand tells us what defines frontier markets, why they can provide both low volatility and high returns.
He also shares the advantages of active investing in these regions, the key sectors, impact of geopolitical shifts and how global investors can benefit from market inefficiencies. One thing is clear, from Vietnam to Morocco, frontier markets provide opportunities for portfolio diversification and long-term growth.
Why you should listen to the interview: Gain expert insights on the unique advantages of frontier markets, from hidden high-growth companies to diversification benefits. Learn how active investing, on-the-ground research and understanding local dynamics can uncover value missed by traditional strategies.
This interview was recorded on 28 January 2026. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
The potential of frontier markets
“These are some of the most efficient stock markets in the world, but the companies are often very dynamic and in those in our portfolio tend to have very high standards of corporate governance and valuations because these markets are very inefficient, are very attractive, unlike what we might see in developed markets and in many emerging markets.
“For instance, there is a bank in Kazakhstan that we’ve been invested in for well over a decade that has returned exceptionally strong shareholder returns, but they still repay us nearly 15% dividend yield every year. It’s completely overlooked and you have these hidden gems in this really fast growing cluster of countries.
“As a region, frontier markets has been the least volatile of any equity index. So if you associate volatility with risk, then bizarrely frontier markets has actually been safer than any other region. And it’s not that Vietnam is not volatile or that Bangladesh is not volatile or Morocco or Romania, but it’s because these countries are not connected to global liquidity flows.
“What I mean is, if we use developed markets as an example, if Nvidia is up 10% today, I would be able to bet you money that TSMC in Taiwan will be up 5% and ASML in the Netherlands will be up at least 5%. However, if a tech stock in Vietnam is up 10% today, I have no idea how it will react in Morocco or in Romania or in parts of Latin America.
That means that on a portfolio level the volatility is very low because they cancel each other out. And that’s a fascinating aspect of frontier markets. So if you want to have exposure to something with low volatility and also low correlation to developed and emerging markets, then frontier markets has a natural home in your portfolio.”
Market inefficiencies create opportunities
“Financials is a very important part of the index accounting for nearly 40% of the opportunity set. However, it is much more dynamic than people realise. For instance, people associate Vietnam with being a very poor country, but it’s developing at an extremely rapid pace, and the depth of the stock market is far greater than people appreciate.
“So the turnover on the stock market has recently been a size one and a half billion dollars a day, which is nearly fivefold out of let’s say Mexico. And within Vietnam, and this is just one of many examples, there’s 1,700 listed stocks and there are certain tech names there that exhibit features that we saw of those in Taiwan 25, 30 years ago.
So if you want to be early with finding these opportunities there’s definitely some gold dust to be found in frontier markets.”
Long-term drivers
“I haven’t been this excited about frontier markets for a long time. I’ve always been an optimist of course, and we’ve done well. But what makes this a really interesting time to invest in frontier markets is that geopolitics have reshaped the world and less money is now being allocated towards developed markets and we’re seeing money coming back to this region.
“There are so many themes we can play: you have an emerging middle class, you have commodity prices going up in certain markets like the copper prices up that benefits countries economies, like Peru. Then what we can see in developed markets is the digitalisation and AI that will enable these banks to be far more efficient and that will unlock further capital to deploy.
There are plenty of opportunities and what we’ve observed is that if this trade war and this uncoupling of the major global supply chains continues, it will have positive spillover effects.”
Why frontier markets needs active management
“Active investing is so important in frontier markets and you need to ensure that you don’t get your capital stock in countries which have, for instance, capital controls or are heading in the wrong direction. And active investing has a very good track record in this inefficient market. So the first point would be go for an active manager.
“At T. Rowe Price we have 1.8 trillion under management and we truly believe in active investing. And to be a good active investor in these markets, you have to travel. This is the last region in the world that will be disrupted by AI because there’s so little sort of digital information. So we need to go and visit the companies on the ground.
You need to see their facilities, their factories, see how they treat the stakeholders not only employees and minority shareholders like ourselves, but also how they treat the society at large and ensure that our money is being prudently taken care of by these businesses.
Personally, I travel probably an average to one country every month. This job has taken me to nearly 60 different countries around the world.”
Conclusion: Frontier markets represent a fascinating blend of growth, inefficiency and opportunity. While risks exist, from geopolitical tensions to local economic challenges, the potential rewards for active investors are significant. Johannes demonstrates how by focusing on research, travel and deep engagement with local companies, investors can uncover hidden gems.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The writer’s views are their own and do not constitute financial advice.
This information should not be relied upon by retail clients or investment professionals. Reference to any particular investment does not constitute a recommendation to buy or sell the investment.
