Mutual Funds Open Door to Frontier Markets

A favorite holding is Safaricom, a dominant cellular-service provider in Kenya. Elefson expects the company to grow for years. "Millions of people in Africa are eager to buy prepaid cards and have phone service for the first time in their lives," he says.

Another Kenyan holding is Equity Bank, which has 4 million accounts, about half of all accounts in the country. The bank has grown rapidly by providing microfinance, making small loans to tiny businesses.

Value investors may prefer Templeton Frontier Markets(TFMAX). Manager Mark Mobius favors unloved companies with solid cash flow. The portfolio has a price-to-earnings ratio of 10, well below average among emerging-markets funds.

A holding is East African Breweries, a Kenyan company that sells alcoholic beverages throughout East Africa. Another is MTN Group, a South African company that operates Africa's largest cellular network.

To bet on a revival of Middle East markets, try Accessor Frontier Markets. The fund matches the country weightings of the MSCI benchmark, and about 60% of its assets are in the Middle East. Big positions are in Kuwait, UAE, Qatar and Oman.

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