That’s not an error.  The blue line – the one that is up 15 percent over the past year – is the $515 million iShares MSCI Frontier Markets ETF (FM).  The red line – which is down 28 percent over the past year – is the $76 million Guggenheim Frontier Markets ETF (FRN).

How could the two broad-based frontier markets ETFs have such spectacularly different returns?  The answer is simple: FRN is a frontier markets ETF in name only. Consider their top five country positions:

Chile, of course, is an emerging market, according to MSCI, the dominant global indexer. So are Colombia, Egypt and a good number of other countries that FRN holds. And Chile – among other commodity-exporting countries – has been absolutely clobbered over the past year, which goes a long way towards explaining FRN’s terrible performance.

And what explains FM’s strong move?

Mostly a few Gulf coast countries that are classified as frontier markets ... for now (more on this important point later).

As it turns out, frontier markets are not especially well correlated to one another. Of the 32 countries that MSCI classifies as emerging markets, the spread in performance over the past year is 102 percent: up 75 percent for the United Arab Emirates and down 27 percent for Ukraine.

The vast majority of FM’s strong performance owes itself to just one region – the Gulf – and particularly to just two countries: the UAE and Qatar, both of which had spectacular years. Excluding Gulf Coast countries, frontier markets were up just 3.83% over the past year. That’s still better than emerging markets, which are down 12 percent, but it’s not great.

The funny thing is that Gulf countries aren’t exactly what most people think of when they think of frontier markets.  The United Arab Emirates is one of the richest places in the world. It’s GDP per capita is over $48,000; it is ranked as the 14th best place in the world to do business by the World Bank; inflation is contained; and its debt is rated AA2 by Standard & Poor’s. It counts as frontier --- for now --- because its markets are not easily accessed by foreign investors.