Five Frontier Markets Exchange Traded Funds
There are now a total of 5 frontier market exchange traded funds available for investment. This map shows how they focus their investments. There is also one frontier market closed end fund from Morgan Stanley.
-The first frontier market fund to launch, the Claymore/BNY Frontier Markets ETF (symbol FRN) includes Chile, Poland, and Egypt as its top three countries. However, all of these countries are typically classified as emerging markets by the major index providers, and together they represent more than 60% of the fund. So the Claymore Frontier Market Fund has a lower ratio of frontier market stocks, therefore it may end up being a lower risk investment.
-The second fund to launch was the PowerShares MENA Frontier Countries Portfolio (symbol PNMA). This new frontier market ETF will track the NASDAQ OMX Middle East North Africa Index, which tracks Bahrain, Kuwait, Qatar, the United Arab Emirates, Lebanon, Egypt, Oman, Jordan, Morocco and Nigeria. So it has a different emphasis than the Claymore/BNY Mellon Frontier Markets ETF. Powershares is focused more on Africa and the Middle East, and invests in more “true” frontier countries, while Claymore takes a more global approach to frontier investing, and includes stocks from countries in Europe, Latin America, Asia, the Middle East, and Africa. As noted above, some of these countries would be considered more as emerging markets.
Nearly 40% of Powershares is invested in Egypt and Kuwait, with Jordan a little further down the list of countries at nearly 15% of the frontier market index. Therefore, over half of Powershares frontier market exchange traded funds holdings will be in three Middle Eastern countries known for their enormous oil wealth.
-The third frontier market exchange traded fund to launch was Market Vectors Africa Index ETF (symbol AFK) from Van Ecks. The Market Vectors ETF covers the Dow Jones Africa Titans 50 Index, which covers 50 stocks from 11 different countries on the African continent: Nigeria, Equatorial Guinea, Zambia, South Africa, Egypt, Morocco, Angola, Kenya, Mali, DR Congo and Ghana. This frontier market index is not designed to cover only frontier markets in Africa, but it is a regional index covering African markets in general. African markets are mostly frontier markets, but Egypt and South Africa are countries in the emerging markets index. And these two countries together make up nearly 40% of the index's total exposure.
-The fourth, and most recent frontier market ETF to begin trading is the Van Eck’s Market Vectors Gulf States Index ETF, trading with the symbol of MES. This Gulf States exchange traded fund is based on the Dow Jones GCC Titans 40 Index, which tracks public companies that are headquartered in the frontier countries that belong to the Gulf Cooperation Council [GCC] or those companies that generate most of their revenues from countries belonging to the Gulf council. The companies in the index must also have a market caps greater than $100 million, a 3-month average daily turnover of $1 million, and lastly trade on recognized stock exchanges.
-The fifth frontier market exchange traded fund is the WisdomTree Middle East Dividend Fund (Ticker Symbol: GULF). The dividend yield on The Wisdomtree ETF is over at 5.3%. GULF will provides investors who want frontier market exposure access to about 70 dividend-paying companies listed in Egypt, Bahrain, Kuwait, Jordan, Morocco, Oman, Qatar and the United Arab Emirates.