ETF Review: Frontier Markets

by ETF Base on December 30, 2009

The Claymore/BNY Mellon Frontier Markets seeks to replicate the Bank of New York Mellon New Frontier Index. What makes this ETF especially unique is the country holdings. The top 5 Holdings are: Chile, Poland, Egypt, Colombia and Kazakhstan. With BRIC ETFs getting all the attention in international funds for years, as investors seek the next round of emerging market economies to satiate appetite for high Beta returns, it may be worth hitching a ride on this Frontier Market ETF.

Name: Claymore/BNY Mellon Frontier Markets
Ticker: FRN
Performance: YTD 52% Gain vs. 26% S&P500 vs. 65% MSCI Emerging Markets (EEM)
Expense Ratio: .65%
Disclosure: No position at the time of publication

Top 10 Holdings

ENERSIS SA      7.56 %
EMPRESA NACIONAL DE ELECT     7.26 %
BANK PEKAO SA     6.69 %
ECOPETROL SA- SPOND ADR     6.46 %
COMPANIA DE MINAS BUENAVENTURA     5.06 %
TELEKOMUNIKACJA POLSKA SA     5.06 %
KAZMUNAIGAS EXPLORATION & PRODUCTION     5.01 %
ORASCOM CONSTRUCTION INDUSTRIES     4.59 %
SOCIEDAD QUIMICA Y MINERA     4.47 %
BANCOLOMBIA SA     4.27 %

Sector Weighting
Financials                    35.09 %
Materials                    15.04 %
Utilities                    13.33 %
Energy                            13.33 %
Telecommunication Services     11.93 %
Industrials                    6.84 %
Consumer Staples            4.32 %
Consumer Discretionary            0.12 %

While FRN hasn’t kept pace with the larger BRIC ETF returns, the frontier markets may present more opportunity given the novelty and smaller investor inflows than what BRIC countries have seen.  While not completely delinked from US returns (we saw this in the 2008-9 financial crisis), FRN should provide some decent diversification outside of US equities.

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