NEW YORK ( TheStreet) -- The IndexIQ Australia Small Cap ETF ( KROO) and the IndexIQ Canada Small Cap ETF ( CNDA) are two exchange-traded funds likely to find a lot of interest from investors and bring IndexIQ their first hits in the ETF arena.

With nearly 1,000 products currently trading, making a lasting impression in the ETF realm has become a difficult task. This is especially true for the various small providers that must compete with titans like State Street ( STT), iShares and Vanguard which have a substantial lead when it comes to total ETF assets.

IndexIQ is one small issuer that has attempted to dig its own niche in the industry by launching a collection of ETFs which employ alternative and actively managed strategies. These instruments include the IndexIQ ARB Merger Arbitrage ETF ( MNA), the IndexIQ Inflation Hedged ETF ( CPI) and the IndexIQ ARB Global Resources ETF ( GRES).

Though the products and their unique investing strategies have managed to grab headlines, unfortunately the same can't be said for investor interest. Together, the combined average daily trading volume of these three complex funds fails to break 20,000.

This week, however, the company debuted a pair of more mainstream funds, a move that could end up putting this small firm on the map.

IndexIQ Tuesday unveiled the IndexIQ Australia Small Cap and the IndexIQ Canada Small Cap ETF. Unlike their previous offerings, these new funds utilize passive indexing methodologies to provide investors access to new regions of the market.

KROO, like it large-cap cousin, the iShares MSCI Australia Index Fund ( EWA), is designed to track the broad Australian economy. However, because the fund seeks to do so from a small-cap perspective, a number of differences become instantly clear, most notably in the funds' diversification.

EWA is dominated by Australia's banks and iron ore producers. Looking at the fund's sector outline, 45% and 25% of the fund's portfolio is dedicated to the financial and materials industries, respectively. Additionally, the fund is particularly top-heavy. BHP Billiton ( BHP), the fund's number one holding, accounts for 15% of the index.

KROO's index trumps that of EWA when it comes to diversification thanks to its more evenly weighted index. Though, like EWA, a quarter of the portfolio's assets are weighted in the materials sector, the fund's top miner, Aquarius Platinum , makes up less than 2% of the fund's total portfolio.

KROO's small-cap focus also provides investors with a better play on the Australian consumer. Consumer discretionary firms represent slightly less than 25% of KROO, making it the second largest slice. In EWA, comparatively, this sector makes up only 2% of the index.

Like KROO and EWA, CNDA and its large-cap cousin, the iShares MSCI Canada Index Fund ( EWC), diverge as well, but in a different fashion. In this case, CNDA provides investors with a more sector specific play on its Canada's markets than its large-cap kin.

EWC has the vast majority of its portfolio allocated across three sectors: financials (34%), energy (24%) and materials (19%). CNDA, on the other hand, has most of its portfolio allocated to materials and energy, which represent 50% and 19% of the fund, respectively.

While more concentrated in sectors, the IndexIQ offering is more diversified among its individual holdings than EWC. Royal Bank of Canada ( RY), EWC's top holding, represents over 7% of the fund. Red Back Mining, CNDA's top holding, accounts for less than 4% of the fund's index. Together, EWC's top 10 holdings account for over 40% of the fund's portfolio, while in CNDA these positions only represent 25% of the fund.

Recently, small ETF providers have had success launching small-cap international funds. Claymore's Claymore/AlphaShares China Small Cap ETF ( HAO) has drawn investor interest by avoiding China's large government controlled firms and increasing exposure to consumer industries. The fund currently has $343 million in assets.

Van Eck's Market Vectors Brazil Small Cap ETF ( BRF) is another recent addition to the ETF industry that has captivated investors with access to consumer industries in emerging markets. Launched in May 2009, BRF has already attracted $700 million in assets and a three-month average daily trading volume of 534,000 shares.

Unlike HAO and BRF, CNDA and KROO won't focus on emerging markets. Still, with strong currencies and resilient economies, Canada and Australia still have been popular nations for investors looking for reliable developed market plays. By playing the small-cap area of these two countries' economies, investors are treated to unique market exposure not seen with traditional large-cap funds.

Ultimately, investors will want to keep an eye on these funds as they make their debuts. Liquidity may be an issue at the launch, so I would hold off on jumping in right away. However, in the near future these funds may end up being the blockbuster success IndexIQ has been looking for.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion had no positions in the securities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.