3 Top-Performing Frontier ETFs

June 06, 2014

UAE is, for now, at the vanguard of an increasingly prosperous frontier market universe.

The S&P 500 Index may be grinding upward these days and reaching new highs, but frontier markets that currently include high-flying Qatar and United Arab Emirates are trouncing the S&P, thanks to investments related to the 2020 World Expo in the UAE followed by the 2022 FIFA World Cup in Qatar.

For example, the Qatar Exchange Index is up more than 48 percent in 2014, and the Dubai Financial Market General Index has returned more than 54 percent year-to-date, according to Bloomberg data.

These two countries and a slew of other prospective investment destinations such as Nigeria or Kuwait are accessible through three frontier market ETFs, and two of them that have relatively heavy weights to these two Persian Gulf countries are outperforming the third so far this year.

“Generally speaking, frontier markets have done very well,” said Dennis Hudachek, a senior ETF specialist at ETF.com. “It’s just that the Gulf States have done extremely well.”

That said, the party won’t last forever for frontier market investors who own one of these funds that hold these two countries, which are in the process of dropping out of the MSCI Frontier Markets Index and joining the MSCI Emerging Markets. The transition, which is now underway, will be completed by the end of 2014.

In the interim, investors are relishing news that foreign direct investment flows into the UAE reportedly surged 20 percent in 2013, and that investments there are seen rising another 20 percent this year to more than $14 billion.

In Qatar, the emir of Qatar has approved some $60 billion to spend on infrastructure projects, including $24 billion for World Cup stadiums, for the 2014-2015 fiscal year, a 3.7 percent increase from the previous year.

Here are the three frontier ETFs currently outperforming in the Middle East:


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