Frontier Market ETFs Worth Considering

by: Tom Lydon

Frontier markets is an investment sector that is just gaining traction with investors. ETFs tracking these markets have given individual and institutional investors alike exposure to exotic markets with growth potential. This exposure doesn’t come with out risks though, just take a look at what is happening in North Africa and the Middle East.

The term “frontier markets” is often used to describe growing markets that are generally less developed, smaller in market capitalization, less liquid and less accessible to investors than “emerging market” countries. Dennis Hudacheck for Index Universe helps decipher some of the latest frontier market ETFs.

Some to keep an eye on:

  • Guggenheim Frontier Markets ETF (NYSEARCA:FRN) – Tracks the BNY Mellon New Frontier DR Index; countries are classified according to GDP, per capita income, inflation rates, privatization of infrastructure, and social inequalities. Chile, Egypt and Colombia are top weightings, representing 59% of the portfolio.
  • PowerShares MENA Frontier Countries ETF (NASDAQ:PMNA) – This ETF is weighted heavily toward Kuwait, Egypt, Qatar and the United Arab Emirates ((NASDAQ:UAE)), although Qatar and UAE are currently under review for a possible upgrade to emerging status. The fund also represents countries such as Morocco, Jordan and Lebanon.
  • Market Vectors Gulf States ETF (NYSEARCA:MES) – MES gives investors 90% exposure into Kuwait, Qatar and the United Arab Emirates (UAE); additional countries represented include Oman, Bahrain and Yemen.
  • WisdomTree Middle East Dividend ETF (NASDAQ:GULF) – Top country exposure in this ETF includes Qatar, Kuwait, UAE and Morocco, with an 85% weighting.
  • Market Vectors Africa ETF (NYSEARCA:AFK) - This fund has a combined 66% weighting in South Africa, Egypt and Nigeria; it has a 22% weighting in offshore companies listed outside of Africa that get a majority of their revenues from Africa.
  • SPDR S&P Emerging Middle East & Africa ETF (NYSEARCA:GAF) – This ETF is has an 88.5% weighting in South Africa, not necessarily a frontier market. Egypt makes up 6% and Morocco 5%. This ETF is currently more of a play on South Africa than on the region.

Make sure you know what you are buying when you look to frontier markets. This sector is relatively new and there is no uniform classification within the industry to define a frontier market.

Tisha Guerrero contributed to this article.