Why are there no index tracker funds for frontier markets?

Question

I am relatively new to investing (using Hargreaves Lansdown) and have built a portfolio of low cost index tracker funds. Given my age (27) I have opted for more risky assets (i.e. my portfolio is skewed towards emerging markets) with the idea that I can wait out any market turbulence.

I recently read about frontier markets and thought they would be a great addition if I could find a low cost way to invest in them. However, there appears to be no index tracker funds (at least on HL). I have read a bit about ETFs for frontier markets and have found other frontier market funds but they have much higher costs than index tracker funds and go against my strategy of paying as little as possible.

Am I right in saying there aren't any index tracker funds for frontier markets? If that is true, what is the reason for this and could there potentially be some index tracker funds for frontier markets in the future?

Answer 1

As indexes effectively buy blind they are exceptionally difficult to run in frontier markets where rates of fraud are high, liquidity/security/corporate governance are all very poor, and you often face highly volatile government and legal systems.

All of these make for a world that is very easy to exploit for unscrupulous players in the face of large foreign capital inflows buying at any market price.

These types of markets you really need boots on the ground and a manager who is able to be much more selective about who to deal with and work out where the fraud is and who/what you can trust etc.