While many investors are shunning risks of any kind, a small but growing number are wading into the most volatile-and riskiest-corners of the world.

Interest lately has revived in so-calledfrontier markets, as pension funds and other investors look to diversify their holdings and capture higher returns. They are putting money into countries at the farthest reaches of the investing world, beyond even so-called emerging markets-countries like Sri Lanka, Bangladesh and the Ivory Coast.

So far this year, returns in frontier nations, whose markets tend to be dominated by financial, telecom, energy and industrial companies, are edging out those of more-developed markets. The MSCI Frontier Markets Index was up 2.4% through July, compared with losses of 6.7% for the MSCI EAFE, which represents foreign developed markets. The Standard & Poor's 500-stock index and the MSCI Emerging Markets Index were basically flat, down 1.2% and up 0.2%, respectively, over the same period.

Investors seeking higher returns, low correlation with other markets and alternatives to conventional stock markets have sunk a record $1.1 billion into so-calledfrontier funds so far this year-more than in any previous year, according to EPFR Global, a Boston firm that tracks fund flows. The previous record: $442.7 million of inflows in 2007.

Most frontier-market countries have stronger balance sheets than heavily indebted developed markets, says Nathan Rowader, director of investments at Forward Management. Based on their long-term fundamentals, many frontier markets-such as those in Eastern Europe, like Lithuania and Ukraine-are relatively cheap, he says.

Yet the risks are considerable. For one, frontier markets are small and illiquid, so investors may find it difficult to get out of a bad-performing stock. Many countries also are fraught with political and currency risks, as well as a lack of regulatory and legal oversight. Returns for the indexes that track these markets are also limited. MSCI has returns for frontier markets that go back to May 2002, while Standard & Poor's Frontier Index (which excludes the Gulf countries) extends back to 1996.

Frontier markets can be notoriously volatile, too. Although the MSCI Frontier Markets Index gained 38% in 2007, it dropped 55% in 2008. What's more, there isn't much of a track record for the funds, many of which have less than three years of returns.

Some analysts caution against investing in frontier markets altogether. 'While there is the possibility that you will get higher returns at lower valuations in some of these markets because they are overlooked, there is no guarantee,' says Gregg Wolper, senior fund analyst at Morningstar Inc. Many frontier funds also tend to be expensive-with some sporting annual expenses of 2% or more, compared with average expenses of 1.4% for funds in Morningstar's foreign large-blend category.

Investors who still want to explore the frontier have a broader menu of options to choose from. In the last two or three years, Guggenheim Partners LLC's Claymore Advisors, Invesco Ltd.'s PowerShares and Van Eck Global have all launched frontier-centric exchange-traded funds, while firms such as T. Rowe Price Group Inc., Harding Loevner LP and Franklin Templeton Investments have launched mutual funds.

Some funds-such as the Forward Frontier Markets Fund and BlackRock Inc.'s Frontier Markets Fund-aim to hew more closely to indexes because of the risks and difficulties of investing in frontier markets. But because the indexes often list the most-liquid stocks in what are thinly traded markets to begin with, investors may end up holding concentrated positions in sectors or countries.

For example, about 30% of the MSCI Frontier Market Index-which tracks 175 companies in 26 countries-is in one country, Kuwait, and has a sector weighting of 53% in financials. A market dominated by financials is typical in frontier countries, says Frank Nielsen, head of index and appliedresearch at MSCI Barra. As countries mature, other industries develop.

Some of the best values are in countries that may not be tracked by indexes. 'By being able to invest in places where others haven't gotten to yet, you're able to buy earlier and cheaper,' Nick Padgett, managing director of frontier-investment firm Frontaura Capital LLC, who has been investing lately in Ivory Coast, Tanzania and other sub-Saharan African countries.

Given the volatility, investors should be prepared to hang on for the long haul. 'It's really for people who want to invest for a while and are betting that these markets will evolve and develop more toward an emerging-markets standard,' says MSCI's Mr. Nielsen.

Another way to get access to frontier markets is to find foreign companies that do business in those markets and whose shares trade on American or London exchanges, says David Riedel, president of Riedel Research Group Inc., a research firm focused on emerging markets. Some U.S.-listed stocks-such as Millicom International Cellular SA and Central European Distribution Corp.-offer an additional layer of protection since the companies also have to meet U.S. standards of corporate governance, disclosure and oversight, Mr. Riedel says.

Conrad Saldanha, portfolio manager of Neuberger Berman Emerging Markets Equity Fund, owns Tullow Oil PLC, a London-listed oil company that has most of its assets based in Ghana and Uganda, and Guaranty Trust Bank, a global depositary receipt that Mr. Saldanha describes as 'one of the strongest banking franchises in Nigeria.'

'For individual investors, investing in frontier markets is like vermouth in a martini,' says Christopher Bliss, portfolio manager of the BlackRock Frontier Markets Fund, which is aimed at institutional investors. 'Just a splash is enough.'

Jane J. Kim

• lately [´leitli] ad.近来，不久前 (初中英语单词)
• frontier [´frʌntiə] n.国境；边疆；边界 (初中英语单词)
• capture [´kæptʃə] vt.&n.捕获；俘获；夺取 (初中英语单词)
• financial [fi´nænʃəl] a.金融的，财政的 (初中英语单词)
• energy [´enədʒi] n.活力，精力；能力 (初中英语单词)
• industrial [in´dʌstriəl] a.工业的，产业的 (初中英语单词)
• previous [´pri:viəs] a.先，前，以前的 (初中英语单词)
• director [di´rektə] n.指导者；....长；导演 (初中英语单词)
• management [´mænidʒmənt] n.管理；处理；经营 (初中英语单词)
• considerable [kən´sidərəbəl] a.重要的；值得重视 (初中英语单词)
• altogether [,ɔ:ltə´geðə] ad.完全；总而言之 (初中英语单词)
• possibility [,pɔsə´biliti] n.可能(性)；希望；前途 (初中英语单词)
• annual [´ænjuəl] a.每年的 n.年刊 (初中英语单词)
• research [ri´sə:tʃ] n.&vi.调查；探究；研究 (初中英语单词)
• invest [in´vest] v.投资；授予 (初中英语单词)
• international [,intə´næʃənəl] a.国际的，世界的 (初中英语单词)
• european [juərə´pi:ən] a.欧洲的 n.欧洲人 (初中英语单词)
• distribution [,distri´bju:ʃən] n.分配；分布(状态) (初中英语单词)
• additional [ə´diʃənəl] a.附加的，额外的 (初中英语单词)
• protection [prə´tekʃən] n.警戒；护照；通行证 (初中英语单词)
• manager [´mænidʒə] n.经理；管理人；干事 (初中英语单词)
• receipt [ri´si:t] n.收到；收据 (初中英语单词)
• splash [splæʃ] v.&n.溅水声；涉水而进 (初中英语单词)
• so-called [´sou ´kɔ:ld] a.所谓的，号称的 (高中英语单词)
• pension [´penʃən] n.津贴 vt.给予...抚恤 (高中英语单词)
• billion [´biljən] num.万亿 (高中英语单词)
• relatively [´relətivli] ad.比较地；相对地 (高中英语单词)
• currency [´kʌrənsi] n.通货；通用；货币 (高中英语单词)
• limited [´limitid] a.有限(制)的 (高中英语单词)
• caution [´kɔ:ʃən] n.&vt.小心；告诫；警告 (高中英语单词)
• senior [´si:niə] a.年长的 n.前辈 (高中英语单词)
• explore [ik´splɔ:] v.勘探；探索；探查 (高中英语单词)
• mutual [´mju:tʃuəl] a.相互的；共同的 (高中英语单词)
• typical [´tipikəl] a.典型的；象征的 (高中英语单词)
• mature [mə´tjuə] a.成熟的 v.(使)成熟 (高中英语单词)
• access [´ækses] n.接近；通路；进入 (高中英语单词)
• farthest [´fɑ:ðist] ad.&a.最远(的) (英语四级单词)
• respectively [ri´spektivli] ad.各自地；分别地 (英语四级单词)
• conventional [kən´venʃənəl] a.常规的；协定的 (英语四级单词)
• gotten [´gɔtn] get的过去分词 (英语四级单词)
• banking [´bæŋkiŋ] n.银行业 (英语四级单词)
• indebted [in´detid] a.负债的；感恩的 (英语六级单词)
• fraught [frɔ:t] a.充满...的 (英语六级单词)
• thinly [θiŋli] ad.薄地；稀疏地 (英语六级单词)
• holding [´həuldiŋ] n.保持，固定，存储 (英语六级单词)
• applied [ə´plaid] a.实用的，应用的 (英语六级单词)
• evolve [i´vɔlv] v.进化；发展；引出；推论 (英语六级单词)
• equity [´ekwiti] n.公平；公正 (英语六级单词)
• guaranty [´gærənti] n.保证；保证书 (英语六级单词)