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Interview w FrontierViking

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I recently had the pleasure to meet up with Anton Berg who is an analyst at Coeli Frontier Markets fund, conveniently based in my home town of Gothenburg, Sweden.

FrontierViking is one Substack investor’s view from the smaller end of the market: looking for overlooked businesses in countries most investors barely consider. Anton and the Coeli team do something similar professionally, with a much larger research machine, institutional capital and constraints that a private investor does not have to think about.

Coeli Finance AB (Sweden) - Bank Profile

I thought it would be interesting to compare notes: how a professional frontier market investor operates, how he chooses countries and stocks, what research trips actually add, how he thinks about currency and liquidity risk, and where a small individual investor may still have an advantage. I also had a few questions about Uzbekistan, Ghana, Nigeria, as well as why Sweden has this small but unusually visible cluster of frontier-market investors. I had rather a lot of questions!

Here is the conversation with Anton:

Background

1. Anton, thanks for doing an interview for the FrontierViking substack! Can you please tell readers a little about your background and how you joined Coeli Frontier Markets fund, and generally got into frontier market investing?

I grew up in the countryside on the west coast of Sweden, and I have always been the type to get slightly obsessed with whatever catches my interest. My friends back home would probably say there’s always some new project, idea or rabbit hole I’m going down.

In my late teens, that interests became stocks. The initial attraction was probably the same as for many people: crazy realisation that hard-earned money could grow “without” working for it. I quickly realised that investing is the optimal interest. A never-ending learning game that combines logical thinking, psychology and the list goes on.. Since I got hooked, I’ve not had time for many more interests.

I stumbled into frontier markets, like most things in life, mostly by chance. Around 2021, I thought much of the Nordic small-cap market looked pretty expensive, so in my search for bargains I started looking abroad. Around the same time, Kaspi listed, and it became my first frontier investment. It was fascinating to discover that businesses of that quality could be that cheap.

Kaspi also indirectly led me to Coeli and my job. Through researching the company, I got in touch with Hans-Henrik and James, who were shareholders as well. We stayed in contact, and when I finished my bachelors, I ended up joining them as the third team member. That was three years ago now.

What a frontier analyst actually does

2. What does your job at Coeli actually look like week to week? I assume plenty of research trips to far flung places are included.

Actually, a surprisingly difficult question to give a good answer to. My job description in its purest form is pretty simple: try to achieve the best possible long-term returns for our investors. The “how” is something you could talk about for hours, and it varies a lot from firm to firm and investor to investor. But ultimately, investing comes down to making more or less qualified guesses about the future.

To make those guesses as qualified as possible, you need information. So my weeks are mostly spent consuming a lot of it – reading, listening, speaking to management teams and all kinds of different people – trying to make good, qualified guesses about the future.

Our investment philosophy is centred around being long-term owners of high-quality companies, and to get the necessary insights for that, few hours are as well spent as being on the ground, face-to-face with management, local experts and other knowledgeable people.

Travelling is therefore an integral part of the job. To give a concrete example, Indonesia has been one of the worst-performing markets globally lately. We’ve followed the market from the sidelines, but with valuations for many companies now back around Covid levels, we think there could be a few good deals to be found. So we’re kicking off after the summer break with a trip to Jakarta. That’s followed by Morocco, Romania and Vietnam, plus a few conferences in places like London, Morocco and Prague. And then, all of a sudden, we’ll be closing the books on 2026.

3. What does a research trip look like? What can you learn on the ground that you cannot learn from annual reports, calls and data?

Research trips are really about finding valuable insights with a shelf life or in plain English, understanding what is actually going on.

One can learn a lot from annual reports, earnings calls and data, but what’s harder to get is that deeper understanding. How do consumers actually interact with the product? Why is management doing X rather than Y? What are competitors doing? What is actually happening on the ground?

I’m of the view that its often a few valuable insights (with a shelf life) that generate enormous value over time. For example, we’ve owned/followed the listed Georgian banks since their IPOs >10 years ago where the thesis boils down to two core valuable insights with a shelf life. i) rational duopoly banking market enables >20% sustainable ROEs and ii) the reforms post the Rose Revolution were hugely successful and fundamentally changed the country’s development trajectory.

Then, every now and then, something happens where you need to reassess whether those core insights still hold and understand what is actually going on.

Again let’s use Georgia during the last election which is a good example. Reading Western media, you could easily have come away thinking that the protests in Tbilisi would severely damage business sentiment and the economy. However, on the ground, the message we were getting from corporates was much closer to “business as usual”. It turned out to be an excellent buying opportunity.

Research trips help enormously in both getting conviction to size these core insights (and hopefully limit losers) and understanding what might actually be going on in periods of market volatility.

Besides speaking to management teams, different specialist etc., trips are also good for expanding your network. Good contacts are incredibly valuable for all parts of our process, idea generation one of them. I was just reading KNCB’s 1H26 results in which they reported EPS of KES 23 for the first six months. We bought our first KNCB shares around 20 KES in March 2024 after the idea was floated to us over a beer the month before on an investor conference in Dubai.

How Coeli works

4. Can you tell us more about Coeli and the Frontier Markets fund. I believe the fund has beaten the S&P500 even over recent years when the S&P500 has had a great tech-driven performance. What is distinctive about its process, and what has driven its strong long-term record?

When I get asked about our investment strategy, the answer always looks something like this:

We invest in high-quality businesses that we think can compound earnings for many years, and our preferred holding period is essentially forever. We want high and sustainable returns on capital, strong cash generation and balance sheets, good competitive positions and, importantly, management teams we trust to allocate capital well. We’re bottom-up fundamental stock pickers but also acknowledge the need for top-down analysis in frontier markets etc etc…

But that is also incredibly generic. How often do you hear a fund manager say the opposite? “We invest for the short term in shitty companies. We like capital-heavy business models with no moat, poor balance sheets and crooks as management.”

So what is distinctive about our process? At its core, I genuinely believe that following the process is much harder than designing the process itself. And we follow ours. We don’t compromise on quality, we invest for the long term, and we maintain high hurdles on valuation.

Why are we able to stick to a not-so-distinctive process when others sometimes can’t? I think a lot of it boils down to incentives.

We’re a small team of three highly incentivised people where our sole focus is long-term performance for our investors. If the fund performs well over the long run, we do well. If it doesn’t, we don’t. My two colleagues own 49% of the management company, and I’m highly incentivised to perform as well (trust me). We invest our own money alongside our investors, and there are no investment committees or layers of hierarchy pushing us towards decisions that might look sensible institutionally but make little sense as investors.

And while we manage other people’s money alongside our own, we have the privilege of a like-minded, long-term investor base. That matters enormously. It means we can afford to look stupid in the short term. We can take meaningful contrarian positions when we think the odds are in our favour without constantly worrying that a few bad quarters will cause the investor base to disappear.

I think that combination of simple principles, strong incentives and the freedom to actually follow them is probably more distinctive than the investment philosophy or process itself.

Where to look for opportunity

5. I see the Fund’s top countries are Vietnam, Kazakhstan, Kenya, Egypt, Georgia, Pakistan, Nigeria, Romania. How do you choose countries? Do you start with countries or companies? What makes a country worth spending serious research time on?

We start with companies. We’re fundamental bottom-up stock pickers, and we wouldn’t build an investment thesis around a country if there were no companies there fitting our liking. So our country exposure is really a function of where we happen to find the most attractive companies at any given time.

That said, country exposure is probably our single largest risk factor, so it obviously matters a lot when we construct the portfolio.

Vietnam is a good example where everything aligns. There are many wonderful companies to invest in, while at the same time we think it’s one of the best macro stories globally. Kazakhstan is different: there are really only two companies we would consider owning, Kaspi and Halyk and at current valuations we think they’re incredible bargains. Then you have Romania, where the macro picture is terrible at the moment, but Banca Transilvania is a well-run company that we’re happy shareholders of.

Ideally, though, you want a country where perception differs as much as possible from what is actually happening on the ground. Of course you want the obvious things like high growth, prudent fiscal management, political stability and so on but everyone else wants those things too, so in theory they should come with a price tag.

Some of our best opportunities in recent years have been in countries coming out of crises. Crises generally move in cycles: good times lead to more spending, more debt and eventually some fiscal sloppiness. Then something unexpected happens, inflation rises, rates go up and conditions get painful, often triggering much-needed reforms. If you can get conviction that the macro environment will improve within a reasonable timeframe, countries near the bottom of their macro cycle have tended to be very good places to look for opportunities.

6. In what countries (or region) are you seeing the best opportunities at the moment and why?

Our portfolio composition probably gives the best answer to where we’re seeing opportunities at the moment.

Vietnam has been a bit of a head-scratcher for us this year. Fundamentally, our companies have performed incredibly well with weighted avg. EPS growth for our Vietnamese holdings north of 30% in 1H26, several holdings look likely to beat their full-year guidance. At the same time, valuations are completely disconnected from those fundamentals. In aggregate, our Vietnamese portfolio trades at historical lows, sub 8 x tr earnings. Multiples have compressing by around 40% compared to a year ago. Consequently, we’ve been buying Vietnam YTD which has been wrong so far.

Central Asia also continues to be overlooked, although perhaps not Uzbekistan anymore. It seems everyone suddenly loves Uzbekistan, I would’ve never thought UzNIF would trade at a premium to NAV. Kazakhstan, strangely enough, still gets relatively little attention evident by the valuations.

Currency risk and the investable universe

7. How do you think about currency risk? How does FX exposure play into your investment decisions?

We think about returns in USD, so currency risk is naturally part of every valuation we do. As a rule of thumb, the inflation differential is a reasonably good guide to where currencies are likely to head over the longer term.

Of course, currencies can do almost anything in the short term. That’s one reason country diversification is important to us, and another reason we like high-quality companies that should have pricing power. If a currency depreciates because of inflation, we want to own businesses that can raise prices and protect their earnings in real terms.

8. What do you avoid investing in?

This list could be exhaustive. There’re more than 10,000 listed companies in our markets, when we filter out companies trading less than $100k/day there’re about 1,500 companies left. When we sort out the companies we don’t think are “quality” the list goes to about 150 which is the universe we focus on.

Uzbekistan

9. I see you have the Uzbekistan Commodity Exchange as background in your whatsapp profile, but there are no Uzbek stocks in the Coeli Frontier Market portfolio as far as I can see - what’s the story there? (This stock is by the way the top holding in the FrontierViking portfolio.)

Haha, that’s right! It’s a good photo.

We’ve actually had exposure to Uzbekistan for many years through TBC, although at today’s valuation, which gives zero value to their Uzbek business, perhaps that doesn’t count.

The picture is from last year when we visited Tashkent to get to know the market better. Partly because of our ownership in TBC, but also in anticipation of the UzNIF IPO and, hopefully, more listings down the road from companies like Uzum and Korzinka.

Unfortunately, the local listed market is simply too illiquid for us at the moment but at this pace it might become investable soon.

The state of frontier funds

10. Why have dedicated frontier funds shrunk over the last 15 years while the underlying economies of frontier markets have generally grown? Is there an opportunity here? Is the trend for frontier funds reversing?

If you track AUM in dedicated frontier-market funds, the space peaked around 2014. In hindsight, it obviously didn’t live up to investors’ expectations. It’s always easy to come up with explanations ex post, but you had a combination of relatively high starting valuations and economies that were much more dependent on debt and high commodity prices than perhaps investors appreciated. From 2014 until around 2022/23, it was mostly downhill.

There’s a cycle to most things. Poor performance leads to outflows, outflows lead to fund closures and the vicious cycle compounds. You could see that in the cost of capital as well. It probably peaked around 2023/24, when several of our markets were going through pretty hefty crises and our portfolio bottomed at 7 x earnings, compared with around 13-14 x back in 2014.

Our sense is that 2023/24 probably marked the bottom for the space in terms of valuations, AUM and number of funds. We and some of our peers have certainly seen increasing investor interest over the last couple of years, but I’d still say it’s very early. Our portfolio today trades at around 8.1x trailing earnings, which is still close to an all-time low.

And that’s ultimately the opportunity. Markets aren’t rational. The weighted-average EPS of our portfolio has compounded at around 16% p.a. in USD over the last ten years. This isn’t growth dependent on some macro or CAPEX cycle, it is real structural growth.

11. I understand Coeli Frontier Markets fund invests in:

[-Companies earning most of their profits in official MSCI Frontier Markets countries.
- Companies exposed to very small MSCI Emerging Markets countries, provided:
- the country represents less than 1% of MSCI EM; and
- GDP per capita is below USD10,000.
- Countries not included in either MSCI EM or MSCI FM, such as Georgia and the Baltic states.]

What’s the rationale for this? Do you have more flexibility with regards to the MSCI Frontier Index vs other frontier funds? And what happens to an existing holding if its country rises above 1% of MSCI EM or GDP per capita exceeds USD10,000? Or a company earning most of their profits in a country that gets upgraded from MSCI Frontier market to Emerging Market?

I wouldn’t delve too much into the index, we don’t. The theme we want exposure to is structural, overlooked growth. Today, 87% of our portfolio doesn’t overlap with the Frontier Markets Index, which probably illustrates that quite well.

The purpose of having a clearly defined mandate is ultimately for our investors to know what exposure they should expect from us. The typical investor has developed-market funds, perhaps a few emerging-market funds, and occasionally a small frontier allocation. We think our definition of frontier markets strikes a good balance giving us a broad enough opportunity set to build the portfolio we want, while at the same time limiting meaningful potential overlap with emerging-market funds.

Historically, when markets have “graduated” from our universe, valuations have tended to increase sharply as well. So in practice, we’ve usually ended up selling because the investment has become less attractive rather than simply because it no longer fits the mandate.

A fun example of the reverse is Indonesia, which as mentioned, we’re heading to in September. It used to sit outside our mandate, but after valuations have fallen by roughly 50%, it has effectively entered our universe again.

The advantages and constraints of a fund

12. Where does Coeli have an edge over an unconstrained individual investor, and where does the individual have an advantage over Coeli?

With AUM comes access. We generally get very good access to management teams, industry experts, local networks and other resources that help us understand a company and its market. We also have the obvious advantage that investing is the only thing we do, we can spend weeks researching one company or travel across the world just to improve our understanding of a market.

But the downside of AUM, the larger you become, the higher your liquidity threshold gets and the smaller your investable universe becomes. And no matter what fund you run, there will always be some rules and constraints you must follow.

I think we’re fortunate to have clients who are well aligned with our investment style and time horizon, but that’s certainly not the case for every fund. A lot of investors are short term momentum investors, buying what’s working and selling what isn’t working. This creates the vicus cycles we talked about earlier and makes it difficult for the fund manager to buy what’s unpopular and risk looking stupid short term even when that might be the best long-term strategy. When you’re managing only your own money, you’ve only got your own temperament to worry about.

Why so many banks

13. Is the concentration in banks because they are genuinely the best frontier businesses, or because they are among the few investable liquid companies?

We genuinely think good banks can be some of the best businesses in frontier markets.

Credit penetration is generally low, so over time you have the potential for loan growth to exceed GDP growth as the financial system deepens. Frontier banks also earn incredible net interest margins because deposit markets are often less sophisticated, customers simply don’t shop around for the highest-yielding savings account. And, the business models are easy to understand, plain vanilla banking. One example could be Meezan Bank in Pakistan, an Islamic bank meaning their customers don’t want interest, so they get free deposits which they then park in government securities. Essentially free money.

The trick, of course, is figuring out which banks are actually good banks. For us, a lot comes down to risk culture, and history gives you a pretty good guide: look at who came through the previous crises in good shape and who blew up. If you can combine a well-run bank with the right macro environment, they can be excellent investments.

So our bank allocation is simply the result of us finding a lot of excellent banks at extremely attractive valuations. Portfolio allocation is always relative to the alternatives, and sometimes those alternatives are difficult to beat. Halyk Bank, for example, is currently earning around a 25% ROE, offering roughly a 15% dividend yield and trading at around book value. That’s a high alternative cost.

Quickfire

14. What is the smallest company or daily trading volume you can realistically invest in?

It obviously changes over time but for us today, it is generally not worth looking at companies trading less than $100k/day.

15. Are you allowed to invest in individual stocks privately?

Yes, otherwise I would probably do something else.

16. Care to share any specific stocks you like?

I like all stocks in our portfolio😊

Ghana and Nigeria

17. One thing that surprised me in the publicly disclosed holdings of the Coeli Frontier Markets fund is that you have Ghanaian stock Fan Milk in your portfolio, but not MTN Ghana. Care to elaborate?

We used to own MTN Ghana but when we couldn’t build a sufficiently large position we decided to exit. I think it is probably the most attractive Telco globally (it is a monopoly) and definitely on our watchlist.

18. I see you have one Nigerian bank - GTCO - in your top 10. What’s your thesis there and general view on Nigeria, and do you see any other interesting stocks in Nigeria?

GTCO is probably the best bank in Africa and we’ve enormous respect for what Segun has built over the years. Like all banks they’re dependent on the macro environment where we’re cautiously optimistic as the reforms done by the Tinubu administration has been historic.

If the macro continues to normalize GTCO has incredible room to grow and deploy its excess liquidity at high returns. Then paying just above book will have shown to be incredibly cheap. If the macro progress would reverse, we still expect GTCO to do okay.

Where ideas come from

19. You found me on substack. Is substack and individual amateur substackers a factor at all in your work? Got any favourite substacks (besides FrontierViking of course)?

Well, I’m always looking for valuable insights and I’m not sure the authors title has too much to do with that. There’s always a lot of noise on these platforms so once you find someone doing genuine work it’s always interesting to follow.

Unfortunately, I don’t really have any go-to Substacks where I read every single post. There’s a lot of skimming from my side, and every now and then something interesting pops up.

20. Where do you get ideas from?

Ideas come from all kinds of different places. We have a more structured part of the process where we screen our universe for the characteristics we’re looking for, but in practice an idea can come from almost anywhere – research trips, company meetings, competitors, industry experts, sell-side research, local investors, reading, Substack, or simply following an existing company and discovering something interesting next door.

After doing this for a couple of years, you also build up a decent knowledge of the companies in the universe. And as mentioned earlier, the number of companies that meet our quality criteria and that we would even consider owning is fairly limited.

So idea generation becomes less about constantly discovering completely new companies and more about waiting for the right opportunity in a company you already know well.

There are plenty of companies out there. I think one often-neglected part of idea generation is simply knowing what you’re looking for, doing enough work to understand it properly, and then having the patience to wait until the price gives you an attractive opportunity.

21. Which other frontier funds or frontier investors are interesting and worth following in your opinion?

Attaching a few links:

Frontier / small EM fund letters

Why Sweden?

22. I understand that beside Coeli, there are two other Sweden-based frontier funds, East Capital and Tundra Fonder - both Stockholm-based I believe. Plus there are prominent individual investors from Sweden like Michael Fritzell. Is Sweden over-represented in this space? Why?

Don’t forget the Dunross team, true frontier pioneers!

You might be right, perhaps we’re overrepresented on a per capita basis and if true, I can only speculate on why. But I’d argue the bigger anomaly is how little interest frontier markets get globally relative to the opportunity.

Anton Berg, left (unsurprisingly), on the ground in Karachi, Pakistan

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