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Frontier markets lure – and reward – hardy investors

Risks have been rewarded by diving into Bangladesh, Ukraine, and other small developing nations.

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After violence erupted in Kenya following December's disputed presidential election, the African nation's stock market might have seemed like a risky place to put money.

But some clients of Wambia Capital in Boyds, Md., evidently saw the situation differently. "Some of the clients said, 'If you see stock bargains [in Kenya], we want to buy them,' " recalls investment adviser Joseph Wambia. These seasoned investors "have already seen ups and downs in markets such as India's and Pakistan's," he explains. And now, as they seek fresh, new investment horizons, they believe "Africa is the next frontier," says Mr. Wambia, who plans to launch a hedge fund for investing in that continent.

Evidently, Wambia's clients aren't the only ones trolling for new opportunities. After exploring such emerging markets as Russia, China, and Brazil, more investors are venturing into smaller terrain from Bangladesh to Botswana.

In such "frontier markets," rising prices of commodities (oil, for instance) and economic and political reforms are spawning greater economic growth and higher corporate profits, experts say. As a result, many of their stock markets are delivering big returns – and helping their investors further diversify their portfolios.

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