FINRA Issues New Investor Alert Regarding “Frontier Fund” Investments

Posted on September 16th, 2014 at 11:58 AM

From the Desk of Jim Eccleston at Eccleston Law Offices

FINRA has issued a new investor alert called, “Frontier Funds-Travel With Care”.  The alert cautions investors who are seeking potentially higher returns given the heightened risks in those “frontier” markets. Generally, frontier funds invest in companies located in countries with developing securities markets such as Argentina, Lebanon, Nigeria, Slovenia and Vietnam.  The promise of higher returns always carries more risk, so investors should consider whether and how such an investment may fit as part of a well-diversified portfolio.

The tips from the alert are as follow:

  • Know which frontier markets the fund invests in. Risk factors vary by country—and no two countries share identical risk elements.
  • Monitor changes in index components. If you are investing in a frontier ETF or index mutual fund, make sure you know and understand the index that the fund tracks and also the components of that index. The countries included in a frontier index can change over time.
  • Geopolitical and currency risks are real. Be aware that some frontier markets are located in parts of the world with unstable political or market environments.
  • Factor in costs and fees. Frontier fund costs and fees can be higher than their emerging market peers, and significantly higher than broadly diversified domestic and international managed funds.
  • Consider Performance History. Frontier funds are relatively new, and most have limited performance histories.

The attorneys of Eccleston Law Offices represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 50 years in delivering the highest quality legal services.

Related Attorneys: James J. Eccleston

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