Frontier funds face shake-up after MSCI move

Fund managers cut Middle East exposure ahead of frontier index shake-up

Investors have been hiking their exposure to frontier markets in recent months, but the sector now faces a shake-up in allocations following recently-announced index changes by MSCI.

As part of the MSCI’s Semi-Annual Index Review this month, UAE and Qatar will exit the MSCI Frontier index and move to MSCI Emerging Markets at the end of May. The index provider said the main reason for the move is the countries’ improved financial regulation. While countries are occasionally downgraded from developed to emerging markets, managers said the promotion of two frontier markets is ‘unprecedented’. But what does the loss of its two largest regions mean for the frontier index? The countries make up 35% of the index currently, with United Arab Emirates accounting for 1...