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ETF junkies have been dying for a frontier markets fund for quite some time, and their wish has finally come true. Claymore/BNY Mellon Frontier Markets just started trading under the ticker FRN. Given the buzz surrounding frontier markets, FRN will probably sell like hotcakes, but don’t celebrate just yet.

As with any ETF, take a look under the hood to see what you’re really getting. IndexUniverse.com takes a closer look at FRN’s holdings. The big problem here is that Poland, Chile, and Egypt make up 64% of the fund.

Don’t get me wrong - these are 3 very attractive markets with a lot of potential. And they certainly have an exotic flavor. But they definitely ain’t “frontier” markets. Sorry Claymore.

Frontier means stuff like Kazakhstan, Georgia or Nigeria - all of which are in the fund, but in much smaller doses. And as the folks at Index Universe point out, Vietnam is strangely absent from the fund.

But the Czech Republic - which is arguably closer to developed market status than the wild frontier - makes up 5% of the fund. IMHO, you need to smoke an awful lot of crack to argue that Czech Republic is a frontier market and Vietnam is not.

Claymore offers the following rationale for this oddball construction:

The index includes only depositary receipts—ADRs or GDRs—which are companies listed on U.S. or other major developed market exchanges. [Claymore President Christian ] Magoon noted that Bank of New York Mellon is responsible for 64% of the world’s depositary receipts.

“There’s certain due diligence and qualifications you have to meet as a company to have a depositary receipt. We think that given the volatility of frontier markets, having that extra process in place is a more conservative approach to investing in frontier markets but also a more effective approach,” Magoon said.

Well, OK, that’s cool. But what’s “conservative” about putting nearly two-thirds of your fund in 3 markets? And besides, that volatility (in appropriate amounts, of course) is a big part of the appeal of frontier markets. That’s what helps them zig while the rest of the world zags. The last thing you want to do is water it down with stuff that you probably already own elsewhere in your portfolio.

I don’t mean to be harsh on Claymore. Liquidity constraints make putting this sort of fund together a tricky exercise. And for investors, having some access to frontier markets is certainly much better than none at all.

But I can’t help remembering what the ultimate frontier investor Jimmy Rogers told Barron’s earlier this year:

Right now there are probably 15,000 MBAs on airplanes flying around the world looking for emerging markets, some of which are now called frontier markets. I’ve been investing in these markets for many years and all of a sudden they have a name.

• See more on emerging market ETFs

Source: Frontier Markets ETF: Curb Your Enthusiasm