Frontier Market ETFs: Growth With a Side of Risk


If you're looking to bet on growth with a side of risk, frontier markets might be your speed. Allocations to these small, expanding markets exist in exchange traded fund ( ETF ) form.

Frontier markets - countries even less developed than emerging ones - could offer better returns over time, but don't expect the performance to be as predictable as that of developed countries, remarks Will McClatchy for NASDAQ . Frontier economies also have low correlations to developed economies.

Look out for a high correlation with commodities, though. Many emerging and frontier markets have vast natural resources, so be sure that you're not overallocated. [ Emerging Market ETFs: Poised to Break Out? ]

Broad ETF investments include:

  • The Claymore/BNY Mellon Frontier Markets ETF (NYSEArca: ECH) .
  • The SPDR S&P Emerging Middle East & Africa ETF (NYSEArca: GAF) is more narrowly concentrated compared to FRN. About 90% of the total portfolio goes to South Africa and Israel.

Economies in Africa are operating with little debt and the content is rich in natural resources. The International Monetary Fund stated that "one of the least noticed aspects of the global downturn has been the resilience of the sub-Saharan Africa region". Sub-Saharan economies are expected to grow by 5% this year. For Africa, Van Eck Market Vectors Africa Index ETF (NYSEArca: EZA) .

Exposure to the Gulf and Middle is may be accessed through WisdomTree Middle East Dividend ETF (NYSEArca: MES) , which has an expense ratio of 0.98%.

Emerging Eastern European countries are represented through the SPDR S&P Emerging Europe ETF (NYSEArca: GUR) , which has an expense ratio of 0.60%.

For more information on the frontier, visit our frontier markets category .

Max Chen contributed to this article.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , ETFs

Referenced Stocks: ETF

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