NEW YORK ( TheStreet ) — Last week, BlackRock (BLK ) rolled out the first exchange-traded fund that tracks frontier markets as classified by MSCI.

The iShares MSCI Frontier 100 Index Fund (FM ) follows an index consisting of the 100 largest securities within the MSCI Frontier Markets universe.

The 20 frontier markets currently included in the MSCI designation are 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.

The largest country representations in the underlying index are Kuwait (30.8%), Qatar (15.8%), UAE (11.9%), Nigeria (10.6%), Pakistan (4.8%), Kazakhstan (4.1%) and Argentina (3.4%).

The iShares MSCI Frontier 100 Index Fund holds 97 securities. The largest allocations include National Bank of Kuwait (8.0%), Mobile Telecommunications (6.7%), Kuwait Finance House (3.9%), Nigerian Breweries PLC (3.7%) and Kazmunaigas Explora-GDR Regs (3.6%).

The current sector breakdown has financials at 56.5%, telecommunications at 15.0%, energy at 9.5%, industrials at 8.5% and consumer staples at 5.2%.

The new ETF has an expense ratio of 0.79%, and interested investors can find additional information in the iShares press release and the iShares prospectus for the fund (pdf).

Analysis/Opinion

The MSCI methodology of identifying countries as developed, emerging or frontier is the most popular country classification system.

The iShares MSCI EAFE ETF (EFA ) for international developed markets has been available for more than 11 years, and iShares MSCI Emerging Markets (EEM ) has been trading since 2003. Why then did investors have to wait until now for an MSCI frontier market ETF?

It boils down to concerns about liquidity and tracking error. By definition, the frontier markets consist of some of the smallest countries with the least accessible markets.

And MSCI didn’t even invent its Frontier Markets 100 Index until less than six months ago. Attempting to address the liquidity concerns, the index lists the largest and most liquid frontier stocks.

The Guggenheim Frontier Markets ETF (FRN ) addressed this concern by using the BNY Mellon definition, which requires US-listed American depositary receipts and includes Chile, Colombia, and Egypt — countries defined as emerging in the MSCI classification scheme.

FM will usually not invest in all 100 stocks in the underlying index. It uses a representative sampling approach, and its third largest holding is currently a money market fund.

BlackRock has stated that it expects FM to have higher tracking error than is typical for similar index ETFs.

Additionally, FM is far from a diversified offering, because more than half of its assets are in financials and nearly one-third are allocated to Kuwait.

According to my ETF Field Guide. all other frontier market ETFs target less comprehensive subsets.

Due to their significant differences, there will be times when FM delivers the best performance and times when FRN is the clear winner. Still, for investors seeking the missing piece of the MSCI global equity puzzle, FM is the best solution.

At the time of publication, Rowland was long FRN. No income, revenue or other compensation (either directly or indirectly) was received from, or on behalf of, any of the companies or ETF sponsors mentioned.

This article is commentary by an independent contributor, separate from TheStreet’s regular news coverage.

Ron Rowland is the founder and president of Capital Cities Asset Management, a fee-based registered investment adviser in Austin, Texas. He is also the founder and publisher of Invest With An Edge and All Star Investor, where he has been providing market commentary and active investment advice since 1991. Opinions expressed in this article should not be considered personal recommendations to buy or sell any security.