Frontier Market ETFs 101

March 28th at 3:00pm by Tom Lydon

Frontier markets is an investment sector that is just gaining traction with investors. Exchange traded funds (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. [Emerging Market ETFs: Still in The Game?]

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 . [Frontier Market ETFs: Is This Their Year?]

  • 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 (NasdaqGM: PMNA) – This ETF is weighted heavily toward  Kuwait, Egypt, Qatar and the United Arab Emirates (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 (NasdaqGM: 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.

For more information on frontier markets, visit our Frontier Markets category.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.