Hedge Fund Report: Betting It All on Russian Gas

Speculation can take different forms. You can reach for big returns in far-flung lands, invest in sectors with a lot of historical volatility, or eschew diversification by betting all your money on a single stock.

Gazinvest, a hedge fund based in the Bahamas, does all three. The $16 million investment vehicle exists simply to bet on Gazprom, the Russian gas monopoly whose shares are mostly off limits to foreign investors. Gazinvet's manager, GEM Global Equities Management, a $250 million emerging markets shop, claims the fund has returned 150% this year through October.

Gazprom has a small presence in U.S. markets. Just over 3% of its stock is represented by American depositary receipts that trade over the counter on the pink sheets. The rest of its float trades in overseas markets that are inaccessible to U.S. investors, although that is expected to change someday when the Russian government makes good on a pledge to liberalize the ownership rules. Since Gazprom's ADRs trade at a 20% premium to their local-market counterparts, many speculators expect to see a pop when the ownership door swings open. ...