With emerging markets funds  delivering returns of even more than 30% a year over the past few years, they have become more mainstream, the Washington Post reports. And as a result, it has become more difficult for managers of such funds to deliver strong returns.

Thus, rather than concentrate on the tried-and-true emerging markets regions, such as India and China, some companies, such as T. Rowe Price and Franklin Templeton, are offering funds that invest in places as exotic as Latvia, Bangladesh, Namibia and the Ivory Coast.

“A lot of hidden gems are no longer hidden,” said Hugh Hunter, head of global emerging markets at WestLB Mellon Asset Management. “Clearly, frontier markets are the next tier. We have no option but to go forward in this area.”

Joseph Rohm, an analyst for the T. Rowe Price Africa & Middle East Fund, explained: “We’ve seen a number of factors come together. Africa is enjoying strong GDP growth. Inflation has halved over the last five years. We’ve seen governments spend heavily on power, electricity [and] roads. For the first time ever in the continent’s history, that’s really happening.”

Indeed, returns in some of the frontier markets have been extraordinary. Since 2004, the Ukranian stock market has risen 700%, 160% in the past year. Slovenia has risen 110% in the past 12 months, Botswana 90% and Bangladesh 60%. The S&P/IFC Global Fronter Markets Index, which covers 22 frontier nations, is up 49% in the 12 months ended Aug. 21, whereas the S&P 500 is up 16%.

But investors should beware. Not only are the track records of such regions unproven and many of them subject to political and economic turnmoil, but they also face the added challenges of a lack of liquidity and strong regulations, and wide flucuations in exchange rates. Many of these countries have only a handful, perhaps a mere six, companies listed on their exchanges.

There are 22 frontier markets, where 540 stocks worth $165 billion are traded, according to Acadian Asset Management.

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