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Moving further out on the efficient frontier, three new ETFs have launched that offer exposure to the smallest developing markets in the world. Each offers at least some exposure, though not pure, to so-called frontier or pre-emerging markets. Those include stocks from tiny countries that can be some of the world’s most illiquid and volatile, but also serve as interesting diversification tools in portfolios. Frontier markets have been an asset class used by institutional investors, and have been available in limited doses through open-end mutual funds of late. With these new ETFs, those alternatives for individual investors just expanded, and are being made available at lower costs. The first to launch was the Claymore/BNY Mellon Frontier Markets ETF (NYSEArca: FRN). The fund, which debuted in June, tracks an index from Bank of New York that currently includes more than 40 ADRs from 15 different countries around the world, including Poland, Egypt, Chile, Peru, the Czech Republic, Pakistan, Colombia, Kazakhstan, Lebanon, Nigeria, Oman, Croatia, Bahrain, Georgia and the United Arab Emirates. It was quickly followed by the PowerShares MENA Frontier Countries Portfolio (NASDAQ: PMNA), which launched in July. PMNA tracks the NASDAQ OMX Middle East North Africa Index, which covers Kuwait, Bahrain, Qatar, the United Arab Emirates, Oman, Lebanon, Egypt, Jordan, Morocco and Nigeria, although it does not necessarily include stocks from each country at any given time. Van Eck’s Market Vectors Africa Index ETF (NYSEArca: AFK) followed on the heels of PMNA, offering exposure to African markets specifically. AFK tracks the Dow Jones Africa Titans 50 Index, which covers stocks domiciled in Egypt, South Africa, Nigeria, Kenya and Morocco as well as foreign companies that derive most of their revenues from Africa. This offers indirect exposure to markets such as Equatorial Guinea, Zambia, Angola, Mali, DR Congo and Ghana. FRN charges an expense ratio of 0.65%, while PMNA and AFK charge 0.70% and 0.83%, respectively, after the application of waivers. |
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