The Emerging Markets Are Getting Smoked By The 'Emerging Markets Of The Future'

With global growth remaining sluggish while interest rates rise, investors have been quick to pull their money out of these markets. Stocks, bonds and currencies have all struggled.

However, many people have been missing the impressive resilience of the Frontier Markets, the high-risk developing economies that eventually grow into Emerging Markets.

"Frontier Market funds ($1.5bn inflows YTD) have decoupled from Emerging Markets ($2.1bn outflows YTD – Chart 2)," noted Bank of America Merrill Lynch's Michael Hartnett on Thursday.

"These so-called “emerging markets of the future” have enjoyed strong growth from low base effects, abundant natural and human resources, the availability of easy gains from market reforms and injections of technology into relatively low-wage economies," said Franklin Templeton's Mark Mobius in June. "Compared with more mature emerging markets, frontier markets are relatively under-researched, and we believe that this lack of familiarity could lead to undervaluation and pricing anomalies that we could seek to exploit through our extensive research resources."

Check out this chart of the year-to-date performance's of the major global market indices. As you can see on the right, the Frontier Markets have actually generated positive returns this year.