Under The Hood: New Frontiers

Emerging markets have long stood as the primary avenue for investors willing to take on higher levels of risk in their international investments. The explosion of ETFs tracking emerging markets equities and debt has no doubt helped quench investors' thirst for riskier global fare. Investors willing to embrace a higher degrees of risk and volatility do not need to stop at emerging markets. They can head to frontier markets, the more rough and tumble cousin of developing nations. Frontier markets are the types of nations

and where the presidents and prime ministers are arguably dictators. Those willing to take on the risks now have a new tool for that: The iShares MSCI Frontier 100 Index Fund

, which debuted today. The new ETF is the first available to U.S. investors benchmarked to the MSCI Frontier Markets 100 Index, according to a

. One of the obvious concerns investors have with frontier markets is liquidity. Suffice to say frontier markets are not known for being awash in liquidity, but FM does run a liquidity screen. Markets such as Argentina, Bangladesh, Croatia, Estonia, Jordan, Kazakhstan, Kenya, Kuwait, Lebanon, Mauritius, Nigeria, Oman, Pakistan, Qatar, Romania, Serbia, Sri Lanka, Ukraine, the United Arab Emirates, and Vietnam, are featured in the MSCI Frontier Markets 100 Index. The index outperformed the MSCI Emerging Markets Index, the index tracked by the Vanguard MSCI Emerging Markets ETF

and the iShares MSCI Emerging Markets Index Fund

through the three months ending July 31, according to iShares data. The filing

about acknowledging potential tracking error and the fact that the fund will not always hold equities from all of the countries featured in the index. FM is home to 97 holdings,

. As is par for the course with many emerging markets ETFs, financial services dominates FM at the sector level with a weight of over 57 percent. With an allocation of 15.8 percent, telecommunications is the only other sector to garner a double-digit weight. Energy stocks are next at 9.1 percent. In terms of country exposure, FM's name might imply a higher degree of risk than the fund actually presents. Kuwait, Qatar and the United Arab Emirates combine for about 58 percent of FM's weight. In the case of Qatar and UAE, those countries are

. The rougher and riskier elements in FM's fray are further down the list. OPEC member Nigeria at 10.6 percent might not be appealing for some, but Pakistan, Kazakhstan and Argentina receive allocations ranging from 4.8 to 3.4 percent. Vietnam, one of the few frontier markets with a country-specific ETF tracking it, accounts for less than 2.6 of FM's weight. FM, which already has

and an expense ratio of 0.79 percent, will compete with the Guggenheim Frontier Markets ETF

and the PowerShares MENA Frontier Countries Portfolio

. For more on ETFs, click

.