Alka Banerjee, vice president of Global Equities, Standard & Poor's Index Services was recently inteviewed on what distinguishes a frontier market from an emerging market.
She replied "there is as yet no real defined number or threshold that can actually tell you that this is frontier versus this is emerging. The frontier markets concept came into existence in the mid-1990s when the IFC decided to focus on markets which were typically not part of the regular emerging markets—those that had established stock exchanges, had a trading history, but were very small and illiquid."
When Banerfee was asked if frontier markets provide a new level of noncorrelated returns? she replied "they absolutely provide diversification. Emerging markets have over the years become far less of a diversification strategy than they were 10 years ago—or even five years ago. Now emerging markets tend to correlate upwards of 85 to 95 percent with developed market performance. It varies across markets, but the correlation numbers for frontier markets can be in the range of 40 to 60 percent, which is a huge diversification."