Investing in Emerging, Frontier and Obscure Markets

Emerging markets have had their moment in the spotlight for some time now and have provided a welcome alternative to the more established and developed markets of the U.S., Western Europe, and Japan.

 

After a very strong run in recent years, the emerging markets are hardly an unknown place to invest and it is certainly too late to get in on the ground floor.

 

It may be time to take a look at the lowest rung on the ladder of developing countries: Frontier Markets, or Frontier Countries.

 

Are Frontier Markets’ ETFs too mainstream?

There are not many options for investing broadly in the least developed countries. There are two ETFs available that focus on Africa. One (EZA) is dedicated to South Africa, the largest and most developed market in Africa. The other (GAF), an emerging Middle East and Africa fund, is heavily concentrated in South African and Israeli shares, with most of the remainder invested in Morocco and Egypt.

 

A new Frontier Markets ETF (FRN) was launched by Claymore/BNY Mellon a couple of weeks ago. This ETF is sure to fill a niche in the market for investors who want to venture a bit outside the more familiar emerging markets. However, like the Africa ETFs, this fund is concentrated in some of the more developed countries – more than 60% of the fund is invested in Poland, Chile, and Egypt.

 

For those interested in the very least developed of markets, it seems no ETFs are currently available that grant that exposure. Of course, there may be good reasons no such funds exist; investing in tiny markets with any meaningful amounts may involve legal issues and risks that make such investing difficult.

 

I will be looking into options for investing directly in frontier markets; my primary interest in Africa, where the potential for future development may be the greatest. That will be the subject of my next post.

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Comments

[Cicero]

What about TRAMX?

[lemming]

is a 1.92% expense fee on TRAMX a little high? or should I just get buy it?