As the millennial movement continues to sweep across the U.S., Nashville has become known as one the largest urban havens for a younger generation looking for more walkable cities and instant access to a variety of choices.

But does it make sense for investors to look to the Nashville region as an investment? Enter the LocalShares Nashville Area exchange-traded fund (ticker: NASH), which was launched in August 2013 as the first city-based ETF of its kind in the U.S.

“It’s the metamorphosis of geographic investing,” says Matthew Hayes, CEO and president LocalShares Investments. “From investing in countries to cities we are at the beginning of something that is going to be very commonplace in the future.”

Holding a basket of 28 stocks — including energy company Delek US Holdings ( DK), restaurant company Cracker Barrel Old Country Store ( CBRL), retailer Dollar General Corp. ( DG) and several health care stocks — the fund has $8.85 million in assets under management. But it has also struggled this year, showing a net outflow of $1.35 million and has roughly $8.85 million of assets under management.

Although the concept of having a city-specific ETF may seem appealing to investors who want to access a portfolio of corporations within a targeted geographic region, some financial experts say that’s a potentially disastrous investing philosophy in practice.

[Read: Pros and Cons of Buying Alphabet (GOOG) Stock.]

“It’s a sucker bet,” says Scott Tucker, president and founder of Scott Tucker Solutions, a fiduciary investment advisor in Chicago. “They are preying upon uniformed investors and people are going to get hurt because it’s a product looking for a place to be sold.”

Two other efforts for a geographic-based ETF failed in 2010. Geary Advisors closed its Texas ETF and its Oklahoma ETF after less than a year, citing thin trading volume and low AUM. The funds failed to attract investors despite solid performance by both.

Tucker says he’s most concerned about the lack of diversity within the fund. NASH includes companies headquartered in or around the Nashville region with at least $100 million in market capital and 50,000 shares in average daily trading volume. The weightings within the fund are based on growth, liquidity, volatility, momentum, return valuation and yield, Hayes says.

Expenses for the passively managed fund are 0.49 percent, or $49 annually per $10,000 invested.

Too much concentrated risk. Traditionally, Nashville has always been known as a health care hub, and is home to HCA Holdings ( HCA), a large-cap operator of nearly 300 hospitals and surgical centers in the U.S. and the U.K. Other health care companies in the NASH ETF include Healthways ( HWAY), Community Health Systems ( CYH), Surgery Partners ( SGRY) and National HealthCare Corp. ( NHC).

The NASH ETF also features real estate holdings that are secondary plays on health care space, including real estate investment trusts National Health Investors ( NHI) and Healthcare Realty Trust ( HR). In all, health care makes up 36 percent of NASH, with the real estate sector making up 17 percent.

“Health care grew up here,” says Margaret Dolan, president and CEO of LocalShares Knowledge. “Because of the health care sector, there are also a lot of new health care companies in the IT field.”

Tucker says NASH suffers from too much geographic risk since all the companies are within the Nashville region, as well as too much industry risk since a majority of the fund focuses on health care.

“It appeals to people from Nashville who want to do a nice thing for a local company and it’s the worst risk someone could take,” Tucker says. “It’s not beating up on Nashville — this is a bad idea for any town.”

[See: 10 Healthy Health Care Stocks to Buy Now.]

Delek, the energy company, is the largest holding in NASH. Coupled with Delek Logistic Partners LP ( DKL), the two holdings make up approximately 10 percent of the ETF.

“Those two holdings have been terrible this year,” says Joshua Wilson, partner and chief investment officer at WorthPointe Wealth Management in Plano, Texas. “It’s also important to understand that [LocalShares is] not actively picking stocks they think will perform well. Instead, they simply created an index of stocks by screening for liquidity and market capitalization.”

Liquidity problems. Paul Bolster, professor of finance at Northeastern University in Boston, says he is concerned about the fund’s lack of liquidity because it is thinly traded making its trading volume too low be a reasonable investment vehicle.

“Over the past year, it averaged less than 1,000 shares of daily volume and did not trade at all on 47 percent of trading days,” Bolster says.

The use of average daily trading volume is also problematic, Wilson says, since it “skews the averages and doesn’t give you an accurate picture of what to expect on a random day.”

Larger companies such Blackrock, iShares or Vanguard would have already dropped this ETF, Wilson says, because it’s not profitable, bringing in less than $45,000 a year to LocalShares based on the assets under management and a high expense ratio.

Wilson also points to the SPY ETF, which is used as a proxy to compare other ETFs. Since the inception of the NASH ETF, SPY is up by 26.5 percent, while NASH is down 0.2 percent, he says. “When I look at this I see someone who has pride on the line, rather than making a business decision,” Wilson says.

Kyle Woodley, managing editor of Investorplace.com, says its wrong to assume that companies in the NASH ETF will prosper as Nashville grows. Dollar General, for instance, only has a handful of stores in the Nashville area. “Some of NASH’s holdings might enjoy more of the city’s fruits, but this fund is hardly a pure play on the city, depsite its moniker. Without the Nashville connection, this is just a random index of U.S. companies,” he says.

[See: 20 Awesome Dividend Stocks for Guaranteed Income.]

“Civic pride is a quality I’d like to see in more people,” Woodley says. “But if you’re better off expressing it through local charitable work than an inefficient investment.”

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NASH ETF: A Flawed Concept, or Ahead of Its Time? originally appeared on usnews.com