It’s easy to get caught up in the hype and excitement surrounding frontier markets. There’s constant talk of which country will become the next China, India or Brazil, and ETFs now provide exposure to many exotic countries previously inaccessible to the average investor.

The term “frontier markets” is often used to describe up-and-coming markets that are generally less developed, smaller in market capitalization, less liquid and less accessible to investors than even “emerging market” countries. Frontier markets are appealing because their returns tend to be less correlated with the broad markets and they offer high growth potential.

The problem lies with determining which countries should be classified as frontier. Different institutions, such as the IMF and the World Bank, as well as index providers, including MSCI, FTSE, S&P and BNY Mellon, have their own country-classification criteria, often resulting in different categorizations.

Therefore, when considering a frontier market ETF, it’s important to understand which classification framework was used and to know the fund’s exact country exposure. In other words, it’s better not to assume anything based on the name of the fund.

In the ETF world, the two most prominent index providers with significant influence in the international space are MSCI and FTSE. Both have transparent and comprehensive country-classification frameworks that can provide some perspective on the frontier landscape that is helpful when comparing funds.

MSCI considers a country’s economic development, as well as the size, liquidity and accessibility of its market to determine its classification. It then classifies countries as developed, emerging or frontier.

FTSE considers a market’s regulatory and settlement environment, as well as its liquidity and transparency. It then classifies countries as developed, advanced emerging, secondary emerging or frontier.

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