Many exchange-traded funds (ETFs) offer investors exposure to equities in frontier markets. Frontier markets are countries with investable stock markets that are less established than those in the emerging markets — essentially, they are developing countries, but they are too small and underdeveloped to be considered emerging markets at the present time. Some countries upgrade from frontier markets to emerging markets, and the opposite is also true. Frontier market investments are most suitable for investors seeking high potential returns who are able to handle very high risks. Countries considered to be frontier markets generally have low liquidity levels, political instability, very little financial regulation and/or accounting standards, and they typically have volatile currency markets. Depending on the institution making the classification, there are about 24 to 40 different frontier markets globally. The following are three of largest frontier market ETFs in terms of assets under management (AUM).

iShares MSCI Frontier 100 Fund

The iShares MSCI Frontier 100 Fund (NYSEARCA: FM) is the largest frontier market ETF with $420.4 million in AUM. It seeks long-term growth by investing in the 100 largest frontier market stocks and tracks the MSCI Frontier Markets 100 Index. As of March 2016, the portfolio is invested in approximately 15 different countries across South America, Eastern Europe, Africa, the Middle East and Asia. The top five weighted countries comprise about 67% of the portfolio and are Kuwait at 22.35%, Argentina at 15.99%, Nigeria at 12.1%, Pakistan at 9.87% and Kenya at 6.48%. Slightly over 50% of the fund is invested in the financials sector, while the next three highest-weighted sectors are telecommunication services, energy and consumer staples. FM has a standard deviation of 13.59% and a beta of 0.67 versus the S&P 500. It has an expense ratio of 0.79% and a 30-day Securities and Exchange Commission (SEC) yield of 5.38%.

Guggenheim Frontier Markets Fund

The Guggenheim Frontier Markets Fund (NYSEARCA: FRN) offers broad exposure to frontier markets and low correlations to other equity classes. It looks for opportunities based on gross domestic product (GDP) growth, per capita income growth, projected inflation, infrastructure privatization and social inequalities. It seeks to provide returns that correspond to the returns of the BNY Mellon New Frontier DR Index.

The portfolio invests in 62 different positions across all market capitalizations; however, it is mostly invested in large caps and small caps. The top five weighted frontier countries are Argentina at 16.86%, Kuwait at 14.90%, Nigeria at 13.65%, Kenya at 10.12% and Pakistan at 9.75%. FRN also has a 10.75% weighting in the United States. It is 50% weighted in the financial sector, and the next three highest-weighted sectors are energy, telecommunications services and consumer staples. The fund has a standard deviation of 15.67% and a beta of 0.97 versus the S&P 500. FRN has $37.9 million in AUM, an expense ratio of 0.71% and a trailing 12-month yield of 1.92%.

Global X Next Emerging & Frontier ETF

The Global X Next Emerging & Frontier ETF (NYSEARCA: EMFM) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Next Emerging & Frontier Index. It provides investors with broad exposure to frontier and next emerging markets. The fund aims to balance its exposure to stocks, sectors and regions.

The portfolio is split with approximately 21% to frontier markets and 79% to emerging markets. EMFM invests in 20 different frontier markets across various regions. Its top five frontier market countries are the United Arab Emirates, Argentina, Panama, Qatar and Bangladesh. It also includes some rarely invested in countries such as Gabon, Ghana, Papua New Guinea, Oman and Zambia. As for sectors, financials comprise 20.1% of the portfolio and the next three highest-weighted sectors are telecommunications services, industrials and materials. The fund has a standard deviation of 13.4% and a beta of 0.85 versus the S&P 500. EMFM has $23.4 million in AUM, an expense ratio of 0.58% and a 30-day SEC yield of 3.23%.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.