Emerging markets are growing so quickly that more intrepid investors are looking for other ground floor opportunities. That’s leading them to frontier market exchange traded funds (ETFs).

A lesser-known part of the investment world are frontier markets, which can also be described as pre-emerging markets. Kim Rahmetulla for Investment U reports that these “pre-emerging markets” are split into two basic groups – Asian and non-Asian. [The Potential Of Emerging Market ETFs.]

Most of the attention is already focused on the Asian region, and the non-Asian area is garnering the most interest – and the best opportunities. Some of the non-Asian ones that have performed best this year include:

  • Market Vectors Africa Index ETF (NYSEArca: AFK)
  • Market Vectors Egypt (NYSEArca: EGPT)
  • WisdomTree Middle East Dividend (NYSEArca: GULF)

Carlyn Cohn for Reuters reports that one present risk in frontier markets is the Fed’s $600 billion buying program. Smaller frontier markets could see investor cash move over to emerging markets that are further along as they search for yields that can’t be found at home. [The Risks and Rewards of Frontier Markets ETFs.]

There are several benefits to including frontier markets in your portfolio; the largest may well be the fact that these markets present an opportunity to ride a wave of growth. These markets are starting from less than many others. On the downside, though, is that these economies frequently have to grapple with poor infrastructure, political corruption and civil unrest. Have a strategy in place when you’re in these markets to effectively manage risk.

Mark Mobius for Gulf News reports that generally, frontier markets are defined as the next emerging markets. ETFs are a great way to get exposure to these markets, which can often have issues with liquidity and restrictions on foreign investment that may make going it alone in these regions a challenge. Consider some of this year’s top performers:

  • Guggenheim Frontier Markets (NYSEArca: FRN)
  • PowerShares MENA Frontier Countries (NYSEArca: PMNA)
  • SPDR S&P Emerging Middle East & Africa ETF (NYSEArca: GAF)

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.