With risk appetites returning, investors are seeing opportunity in the small developing markets known as “frontier” markets.
Frontier markets are those economies that are too small, illiquid or otherwise unaccesible to be classifed as “emerging” markets. Values can swing wildly as they did in 2007 when many frontier markets delivered double or even triple digit returns.
WSJ columnist Annelena Lobb reports in Rediscovering a Frontier Ethic of Investing, that several active fund managers are seeing increased interest as the MSCI Frontier Markets Index has climbed 51% from its March lows.
ETF investors can gain exposure to Frontier Markets through the PowerShares MENA Frontier Countries Portfolio (PMNA). The fund invests in the largest and most liquid securities of companies domiciled in Middle Eastern and North African countries that have smaller economies or less developed capital markets than traditional emerging markets.
Another choice is the Claymore BNY Frontier Markets ETF (FRN). This fund invests in several frontier markets including Bahrain, Chile, Columbia, Czech Republic, Egypt, Estonia, Georgia, Kazakhstan, Kuwait, Lebanon, Nigeria, Oman, Pakistan, Peru, Poland, Ukraine and United Arab Emirates.
For more, see the Investing in Frontier Markets with ETFs.