This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Frontier Market ETFs or Emerging-Market ETFs?

NEW YORK (ETF Expert) -- Daisy Maxey is a talented financial columnist for WSJ.com. She also follows me on Twitter. Not surprisingly, then, I may be slightly hesitant to question the timing of her recent feature, "Frontier Market Funds Offer Promise, Risk."

By the percentages, Maxey cites data that are supposed to represent opportunity in the least developed countries and regions. Yet the risk-adjusted returns over a 10-year rolling period are smaller for frontier markets than for other investment areas. Even if one ignores measures of risk, such as beta and standard deviation, the returns themselves are less palatable than those of the emerging markets, developed international markets and the U.S.

Will the Next 10 years Be Better for the Frontier?
10-YR Annualized Historical
MSCI Emerging Markets 13.4%
MSCI Germany Index 8.7%
MSCI All-World Ex US 7.5%
MSCI EAFE Index 6.2%
MSCI Japan Index 6.1%
MSCI USA Index 5.8%
MSCI Frontier Markets 5.1%
Source MSCI.com

Naturally, I am curious why Ms. Maxey decided to focus on the worst 10-year annualized performer. One possibility may be the analysts in the article itself. Many seem to feel that the next 10 years will reward countries with the greatest potential for growth -- countries with greater gross domestic product possibilities than that of traditional emergers like China and Brazil. Conversely, the near-term performance of a relative newcomer, iShares MSCI Frontier 100 Index Fund (FM), may have been the impetus behind discussing investments from unpaved roads less traveled.

On the other hand, it is hard to dismiss the reality that frontier market performance is all over the proverbial map. Guggenheim's long-standing Frontier Market ETF (FRN) has journeyed in the opposite direction, leaving its investors to ponder their frustrating allegiance to riskier regional assets.

Meanwhile, PowerShares Middle East North Africa Frontier (PMNA) has also been a disappointing underperformer.

So where does that leave the discussion? Wander as deep into the investment jungle as one can possibly go? Or stick with emerging markets where the risks may not be quite as great (or as exotic) as Vietnam or Peru?

At this moment, the best risk-adjusted rewards are likely to come from less volatile noncyclicals in the emerging markets. I like iShares MSCI Emerging Market Minimum Volatility (EEMV). There is less guesswork with respect to the breakout country ETF from the frontier or the emerging realm; moreover, there is less reliance on energy and materials to carry the day.

The net expense for the time being is a paltry 0.25%, the 30-day SEC yield is 2.75%, and the beta is 0.87 with the S&P 500. While EEMV started slow out of the 2013 gate, it has broken solidly above a 50-day moving average.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

Gary Gordon reads:

Real Clear Markets
Jeff Miller
indexuniverse
Charles Kirk
On Twitter, Gary Gordon follows:

Jonathan Hoenig
Doug Kass
Hard Assets Investor

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,125.39 +18.69 0.11%
S&P 500 2,000.13 +0.11 0.01%
NASDAQ 4,570.7650 +0.1280 0.00%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs