As recently reported by The Financial Times, the subprime-driven credit crisis is causing some people to look at frontier markets for unconventional, uncorrelated returns.  As the article notes:

“…Godvig Capital Management’s Babylon Fund, which aims to profit from the rehabilitation of Iraq, is one of a growing band of ‘frontier funds’ which seek returns in everything from North Korean sovereign debt to political change in Cuba. With regard to the latter, the Herzfeld Caribbean Basin Fund has jumped 18 per cent since the announcement of Fidel Castro’s retirement.

…Capturing full exposure is difficult, as frontier markets are usually small and heavily restricted, or even closed. The HCBF targets non-Cuban companies that might do better if the country comes in from the cold. So far, its underlying net asset value has actually slipped slightly since Mr Castro’s departure.  Meanwhile, aggregate market capitalisation for Iraq¹s clutch of traded stocks is less than $2bn and trading volume is very thin. Banks dominate the roster of listed companies, although it is also possible to take a punt on the tufted carpeting industry. About half the Babylon Fund is invested, directly or indirectly, in Iraqi equities. The rest is in Iraqi debt or non-Iraqi equities with some exposure to the country.…”