Emerging and frontier markets offer the greatest potential reward for knowledgeable investors who can identify compelling opportunities. Contrary to popular belief, frontier and emerging markets often carry less risk than investing in developed markets. This is primarily because these markets are inefficient and the cost of capital is high.
With far fewer sources of capital and many more small and medium sized companies in search of funding, investors are able to craft better terms than would be available in the developed world. While these markets are indeed less efficient and less transparent, they are not inherently riskier. Nevertheless, capital is provided at a premium simply because there is a shortage resulting from the general perception of increased risk.
Craven House Capital´s primary business can be classified as a very specialized form of risk arbitrage. We achieve outsized returns by capturing the spread between perceived risk and actual risk.