An ETF With All Russia's Benefits -- and Risks

As the largest country on the face of the planet, Russia has its fare share of natural resources. It also has an economy that continues to grow at a healthy clip as evidenced by its 8.5% expansion in the first quarter.

Last spring, Van Eck Global launched its Market Vectors-Russia ETF (RSX Quote - Cramer on RSX - Stock Picks) to give investors access to the country.

"The fund was developed from our understanding that Russia was being under-represented among the BRICs and deserved its own ETF," says Adam Phillips, Van Eck's Director of ETF Sales.

Harvey Hirsch, a senior vice president at Van Eck, acknowledges the fund's heavy exposure to commodities and to the oil and gas sectors.

"The Russian economy is being driven by the energy sector," he says. "This ETF is a good vehicle for investors to gain exposure to that part of the market as well as to other rapidly developing sectors."

A Rags to Riches Story

Russia has come a long way since its financial crisis of 1998.

"Within less than a decade, the country has gone from bankruptcy to prosperity," says Dr. Marshall Goldman, a professor of Russian economics at Wellesley College and author of Petrostate: Putin, Power, and the New Russia.

The Market Vectors-Russia ETF is weighted 41.9% in oil and gas, and 23.4% in iron and steel. Its top names include Rosneft, Gazprom (OGZY.PK Quote - Cramer on OGZY.PK - Stock Picks), Lukoil (LUKOY.PK Quote - Cramer on LUKOY.PK - Stock Picks), Norilsk (NILSY.PK Quote - Cramer on NILSY.PK - Stock Picks) and Mechel (MTL Quote - Cramer on MTL - Stock Picks).

Alexander Kliment, an associate for Eurasia Group, a political risk advisory and consulting firm, expects Russia's metals and mining sectors to remain especially strong, but not without risk.

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