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Earlier this year I wrote an article on Frontier Markets titled Explore some Frontier Markets !!!!!. In the ETF world, a few ETFs were launched this year specifically for frontier markets.In this post lets look at four of them.

Photo: Beach at Agadir, Morocco 

1. PowerShares MENA Frontier Countries (PMNA)

Launched on July 9th of this year, this ETF covered the Middle East or North African countries. Some of the countries this fund invests in are Egypt, Morocco, Oman, Lebanon, Jordan, Kuwait, Bahrain, Qatar and United Arab Emirates.

Since the launch the fund is down 39.67%. Thats just over 4 months. The fund has an expense ratio of 0.95% and assets of about $19M.

Factsheet Download: factsheet-pmna.pdf

2. Market Vectors Africa ETF (AFK)

Launched in July, this fund tracks the Dow Jones Africa Titans 50 Index. AFK provides exposure to countries like Egypt, Morocco,South Africa,Nigeria,etc.

The expense ratio is 0.98% and the fund is down 43.96% year-to-date.

3.Market Vectors Gulf States ETF (MES)

MES tracks the Dow Jones GCC Titans 40 Index which includes stocks from the GCC countries of Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates and Saudi Arabia.

The expense ratio is 0.98% and the fund is down 42.71% year-to-date.

4. Claymore/BNY Mellon Frontier Markets (FRN)

FRN tries to mimic the performance of The Bank of New York Mellon New Frontier DR Index. The expense ratio is 0.65% and the fund’s inception date is June 12,2008.

Some of the countries this fund invests in are Poland, Colombia, Peru, Lebanon, Pakistan, etc.Year-to-date the ETF is down about 45%.

Factsheet Download: frn_fact_card.pdf

As we can see in the above performance numbers these ETFs are not for the faint-hearted. The frontier market countries are much worse than the emerging markets of say Brazil or India. These ETFs are extremely risky and may fall even more by the end of this year.

Related article: Few Frontier Market Investment Ideas

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In this post lets review two ETFs to cover the largest companies in Latin America and Europe.

A simple and efficient way to invest in foreign companies is via ETFs. In the current market conditions, they offer more advantages than just buying individual stocks. There are hundreds of ETFs on the market in all flavors and color.

If an investor is looking to gain exposure to the top companies of Europe and Latin America, then the following 2 ETFs may be the answer:

1.iShares S&P Latin American 40 Index Fund (ILF)
This ETF contains 40 of the most liquid company stocks from Mexico and South American markets.

Total Assets = $3.3B

Brazilian stocks form the major part of the portfolio at 67% followed by Mexico.

2. DJ Euro STOXX 50 ETF (FEZ)

This fund invests in the 50 largest companies of Western Europe excluding UK.

Total Assets = $420 M

France and German stocks account for about 63% of portfolio. For more info on this ETF goto: A Look at DJ EURO STOXX 50 ETF: FEZ

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Rio De Janeiro, Brazil

The Grande Latin America ETF is the iShares S&P Latin America 40 Index Fund (ILF) since it has the 40 largest companies in Latin America as defined by the S&P Latin America 40 Index.

S&P Definition for this Index:
“S&P Latin America 40 represents major economic sectors of Mexican and South American equity markets. It includes highly liquid securities from Mexico, Brazil, Argentina and Chile. ”

ETF Profile:
The largest ETF for the top companies in emerging Latin America is ILF. It has assets of just over $2.0B. ILF gives exposure to four countries and 36 stock. The other for Latin America SPDR S&P Emerging Latin America ETF (GML) has a tiny asset base compared to ILF.

Some of the largest companies in the ETF are America Movil(Mexico), Petrobras (Brazil), CIA VALE DO RIO DOCE(Brazil), three banks of Brazil - Banxo Badesco, Itau Bank, Unibanc, Cemex and Walmart De Mexico of Mexico.

ETF Strengths:

• Contains the largest 40 companies in Latin America
• Financials make up only 16%
• Management fees of 0.50%
• Year-To-Date return = -4.74% only

ETF Weaknesses:

• Since it is for Latin America this ETF’s performance is tied closely to the commodity markets
• The Top 10 stocks account for about 70% of portfolio.

Overall picking up ILF is a better way to invest in Latin America in this market. Caution is warranted as Latin American markets are not for the faint hearted and commodity markets are very volatile and risky.

For the latest Factsheet for this ETF click: Factsheet ILF.

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