iShares Eyes Frontier Africa, Gulf For ETFs

August 23, 2012



iShares, the world’s largest purveyor of ETFs, is planning to add another high-dividend-focused fund to its roster of ETFs as well as two regional equities strategies that would tap into emerging and frontier markets in Africa and in the Gulf region.

While the dividend-ETF space seems to be well-trodden these days thanks to a flurry of launches that have sought to capture investor demand for income-generating strategies, investing in growing African and Middle East economies remains a little less mainstream.

Fund providers like WisdomTree, Van Eck and PowerShares have their own take on regional frontier funds, but they are still small and largely devoid of exposure to booming African economies such as Nigeria and Kenya. The PowerShares MENA Frontier Countries ETF (NYSEArca: PMNA) is perhaps one of the largest in the space, with $16 million in total assets.

Still, iShares’ filing speaks to the growing demand for frontier and emerging markets strategies, as U.S. investors look to add exposure to international equities at a time of slow economic growth across much of the developed world, particularly those that go beyond the traditional emerging markets staple BRIC—Brazil, India, China and Russia.

In three separate filings submitted to regulators this week, iShares outlined plans for the following funds:

The iShares MSCI USA High Dividend Yield Index Fund tracks a market-capitalization-weighted MSCI index comprising companies that have delivered a higher-than-average dividend yield—at least 30 percent higher than the yield of the MSCI USA Index. The companies also need to show a five-year history of “non-negative” dividends per-share growth. Consumer staples, energy and health care dominate the portfolio.

The iShares MSCI GCC Countries ex Saudi Arabia Index Fund is by many measures a frontier market fund, as it serves up exposure to equities from Gulf Cooperation Council (GCC) countries excluding Saudi Arabia. Bahrain, Kuwait, Oman, Qatar and United Arab Emirates make up the portfolio, which is heavily allocated to financials, industrials and telecommunications.

The iShares MSCI EFM Africa ex South Africa Fund tracks a free-float-adjusted market-capitalization index comprising equities from six African emerging and frontier countries such as Egypt, Kenya, Mauritius, Morocco, Nigeria and Tunisia. Consumer staples, financials and industrial names dominate the exposure.

No tickers or fees were disclosed in any of the filings.


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