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14 Jul 2008

DanFonds Launches Frontier Hedge Funds

A Copenhagen based Cayman fund, DanFonds, is trying a novel approach to the hedge fund market by launching its ‘Frontier Markets Fund’, a hybrid between the public market hedge fund approach and the private equity model.

In a press call with Alex Akesson on Friday, CEO of DanFonds, Daniel Broby referred to 'peak oil', and the 'commodity super cycle' and also how the writing off of debt by the Paris club have opened the market for frontier funds.

"What we are seeing is generational change; the industrialisation of the final countries that had been left behind." Broby said, "These are not markets for the faint hearted. They are corrupt, illiquid and difficult to access. On the other hand, that is compensated for by the risk premium and the expected returns."

With a philosophy of 'Globalisation is just an extension of industrialisation' and that 'frontier markets are the next emerging markets', their website says that frontier markets are at the very edge of the investable public securities universe.

However, there is potential for high return. With a combined market capitalisation of around $1.7 trillion, frontier markets are in the early stages of development and growing towards entry into the emerging markets indices.

"You either believe in the opportunity or you do not. We don't try to convince investors. We mearly structure the best way to capture that opportunity." Broby concluded.

When asked to comment on the new fund launches, Broby's staff responded, "200 years ago California was a frontier market." said Alexandra Hayles, Country Analyst.

While Klaus Jeppesen, Head of Risk commented, "traditional risk models just don't work in these countries. You have to start with a blank spreadsheet." "There are plenty of opportunities in Francophone Africa. You just have to know where to look for them." Brice Beumo, Director of DanFonds finished.

Danfonds operates from two locations in Denmark, its operational offices in the center of Copenhagen and its registered offices in Martofte. It has also established access to offices in selected frontier market locations using the facilities of Regus Worldwide.

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