ETF Expert

Interest in MENA (Middle East North Africa) continues to pour into the ETF lexicon. It was less than 10 days ago when I profiled the first two ETFs on this frontier — PowerShares MENA Frontier Countries Portfolio (PMNA) and Van Eck’s Market Vectors Africa Index Fund (AFK).

Not to be outdone, WisdomTree recently gave us the Middle East Dividend Fund (GULF). And Van Eck has yet another vehicle, the Market Vectors Gulf States Index Fund (MES).

The primary criticism that I levied on the PowerShares MENA Fund (PMNA) was the 60% weighting in financials. With WisdomTree focused heavily on dividend-weighted indexes, I am hardly surprised by Middle East Dividend Fund’s (GULF) 50% allocation to financial companies.

What’s more, by exchange-traded investing standards, they are both quite expensive. The PowerShares MENA Fund (PMNA) publishes a 0.95% annual rate while the Middle East Dividend Fund (GULF) is putting forward a 0.88% annual expense.

Of course, dividend seekers might be more attracted to the latter. GULF currently registers a 5.35% annual yield.

So what about the Market Vectors Gulf States Index Fund (MES)?  Yes, it gives investors access to the markets of Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. Yes, it is tracking an index established by the reputable Dow Jones.

Yet my concerns about overexposure to financial companies is found with the Market Vectors Gulf States Index Fund (MES) as well. According to a corrected post at Business Wire, the index that is being tracked is primarily concentrated in the banking, financial services and technology sectors, with banks and finance companies representing approximately 60%. (Note: The Market Vectors Gulf States Index Fund (MES) also sports a total net expense of 0.98%.)

Of course, what is most intriguing about MENA is the economic growth and the young worker demographic. One might assume that this would benefit other economic segments than banking/financial services alone.

That said, it’s not as if the oil-producing, cash-rich countries don’t require loans, credit, insurance and services. So if you’re fine with a heavy financial weighting, each of the new MENA ETFs will work.

(For more on MENA, click here.)

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