Courtesy of the Wall Street Journal, a report on growing investor interest in Argentina:

Hedge funds are piling into investments in a most unlikely locale: Argentina.

Argentine stocks and bonds are on a roll less than a year after the nation, which some economists estimate to be Latin America’s fourth-largest economy, defaulted on its debt amid a legal clash with investment firms including Paul Singer’s $25 billion hedge fund, Elliott Management Corp. The gains are the latest sign of how investors are searching the world for opportunities amid superlow interest rates and uneven growth in developed markets.

Even after a recent pullback, Argentina’s Merval stock index this year has surged about 27% in peso terms and 20% in dollar terms, making it one of the world’s best-performing markets. Argentine sovereign debt climbed 15.3% in local-currency terms through Tuesday, according to the Barclays Emerging Markets Argentina International Issue Index.

Some hedge funds have been bullish on Argentina for some time. But momentum is building, investors say. Late last year, Alan Howard’s Brevan Howard Capital Management started a hedge fund to bet on Argentine investments, working on the effort with Pierpaolo Barbieri, a native of Argentina and an executive at Prof. Niall Ferguson’s Greenmantle advisory fund.

PointState Capital LP—launched in 2010 byZach Schreiber and three fellow alumni of Stanley Druckenmiller’s Duquesne Capital Management LLC—has hired Dario Lizzano,who once ran Latin American research and sales at Morgan Stanley, to help on PointState’s own Argentine investments, sized at about $1 billion.

Bienville Capital has raised about $250 million for an Argentine fund that is up about 25% this year.

Federico Weil, chief executive of Argentina-based property company TGLT SA, which has shares traded in the U.S., says he met with about 25 hedge funds interested in Argentina on a weeklong trip this month to New York.

“It was very easy” setting up investor meetings, he says. PointState and Bienville each owns 13.5% of TGLT.

Some of the funds are focusing on Argentine equity and debt, while the Bienville fund also is investing in private companies that it expects will go public, according to the firm’s founder, Cullen Thompson. Representatives of Brevan Howard and PointState wouldn’t comment.

Foreign investors have had a strained relationship with Argentina, to say the least. In 2001, the nation decided to stop making debt payments to creditors holding $80 billion of debt. In 2012, Elliott persuaded a court in Ghana to detain an Argentine naval training ship after Argentina failed to pay claims on $2.5 billion of debt. Other creditors have tried to seize the Argentine presidential plane.

In July of last year, Argentina defaulted on its debt for the second time in 13 years, amid a continuing legal battle with creditors. The nation also has seized significant assets in Argentina owned by foreigners in recent years.

Hedge funds say they are warming to the nation largely because December marks the end of President Cristina Kirchner’s second term in office. Mrs. Kirchner has embraced policies that some say thwart growth. The nation’s constitution doesn’t allow anyone to serve for more than two successive presidential terms, so Mrs. Kirchner is ineligible to run in October’s election.

Each of the candidates hoping to succeed her is expected to bring a more market-friendly approach to fixing the nation’s economy. Argentina has a population of about 41 million and is resource-rich, including significant agricultural and energy assets. But the government says the economy grew just 0.5% in 2014. Private economists consider even that too rosy, estimating that gross domestic product shrank significantly.

“Argentina has been a bad situation, but with some changes it can get considerably better,” says David Tawil, president of hedge fund Maglan Capital LP, which manages $80 million and owns 14% of Madalena Energy, a small Argentine energy company that trades abroad. “The upside is enormous.”

To be sure, the gains in some local investments look less impressive when denominated in dollars than in peso terms. But some Argentine companies with shares listed abroad have enjoyed gains there, too.

Some say it is too early to make serious bets on the nation, noting the economy’s slump may be hard to end. Skeptics also say President Kirchner’s successor may not embrace policies that are radically different and that her party’s representatives in Congress could constrain actions by the new president.

Further, Mrs. Kirchner could run for office as a congresswoman, and some observers speculate she might run again for president down the road. Mr. Singer’s own fund continues to be skeptical about Argentine investments, executives say.

“These remain very volatile, risky investments,” says Arturo C. Porzecanski, a professor of international economics at American University’s School of International Service. He says local citizens remain supportive of subsidies and deep government involvement in the economy and are wary of a drastic shift from Mrs. Kirchner’s policies.

George Soros’s Soros Fund Management LLC, which has been a major holder of YPF SAsince 2011, sold over two million shares of the big state-owned energy company in the second half of last year, according to securities filings.

But the fund remains YPF’s third-largest shareholder, with 11.6 million shares as of the end of the first quarter. Other hedge funds, including Mason Capital Management LLC, Knighthead Capital Management LLC and Discovery Capital Management, also are big holders.

Bulls on Argentina say the possibility of Mrs. Kirchner’s eventual return will pressure her successor to improve economic growth before she has a chance to engineer a comeback, helping Argentine investments.

They expect a new government to drop some taxes and reduce limitations on imports and exports of various items, encouraging foreign capital to return to the country.

Mr. Thompson of Bienville Capital says he is bracing for volatility ahead of October’s election. But he expects to build on the company’s position in Argentina in any selloff, convinced there will be economic change no matter who wins the election.

“It will be much more difficult from here, because the political season is ramping up” and investors are trying to divine what policies a new government might embrace, he said.