Global X Funds, the New York-based fund sponsor known for its
niche strategies, today is launching two frontier-market-focused
that look to put at investors' fingertips unprecedented access to
Nigeria, Mongolia and Central Asia.
Global X Nigeria Index ETF (NYSEArca:NGE)
is the U.S. ETF market's first exchange-traded fund to focus
exclusively on the most populous country in Africa. The fund tracks
a Solactive index designed by Frankfurt-based Structured Solutions
AG. It comes with an annual expense ratio of 0.68 percent.
The fund serves up direct exposure to some 25 Nigerian companies
in a way that has only been available until now in a more diluted
way through funds like the iShares MSCI Frontier 100 Index Fund
(NYSEArca:FM), which allocates some 13.5 percent to Nigeria, or the
Guggenheim Frontier Markets ETF (NYSEArca:FRN), where Nigeria
represents 4.7 percent of the portfolio.
Global X Central Asia & Mongolia Index ETF
also tracks a Solactive index and invests in some 25 securities
from Mongolia as well as Kazakhstan, Kyrgyzstan, Tajikistan,
Turkmenistan and Uzbekistan. AZIA comes with an annual expense
ratio of 0.69 percent.
Both Global X ETFs are what the company called "first to
market," beating New York-based Van Eck to the punch. Van Eck has
two Market Vectors Nigeria-centered ETFs in registration, as well
as a Mongolia ETF that looks to tap into the natural-resources-rich
regions with funds that have been sitting in the regulatory
pipeline since 2011.
ETFs focused on frontier markets are still relatively few, but
they are often heralded for the diversification they provide given
that their returns tend to be less correlated with broad markets.
That virtue has come into focus in recent years as rising
correlations among asset classes have increasingly made true
portfolio diversification a challenge.
But from a fundamental perspective, both ETFs also represent an
investment opportunity on natural-resources-rich nations that are
benefiting from growing demand either domestically or from
In the case of Nigeria, the country is not only oil-rich and one
of the world's major oil exporters, it also has a booming middle
class and rising domestic consumption, which are fueling growth in
GDP, Global X research analyst Alex Ashby told IndexUniverse.
"We've been looking at Nigeria for a long time and we are very
excited about the country's demographics and growth potential,"
Nigeria was one of the best-performing stock markets in Africa
in 2012, and has continued to outperform emerging market
counterparts so far in 2013.
Mongolia, meanwhile, has an array of mineral deposits including
oil and precious metals, and is in full expansion mode as it
benefits from growing demand coming from neighboring China.
The country's mining industry is still in its infancy, but it
should continue to boom as it looks to meet demand from China as
well as other international markets, Ashby noted.
"China is the bigger driver in that region," Ashby said of
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