With all the concern about emerging markets recently, many investors think that frontier markets are suffering from the same malaise; actually, they've held up very well in the face of stock market downturns in the rest of the world, explains Gordon Pape, editor of Internet Wealth Builder.

Frontier markets (also known as pre-emerging markets) consist of small economies that are in the early stages of growth and development. They can be very large in population terms (Pakistan, Bangladesh, and Nigeria are examples) or very small, like Kuwait.

The Wall Street Journal recently published a major feature on frontier markets, noting that there is very little correlation between their performance and those of emerging and developed economies. For example, in 2013, the MSCI Emerging Markets Index was down 12% while the Frontier Markets Index gained 16%.

Investors are starting to pay attention. The Journal reported that funds that invest in frontier stocks attracted US$244 million in new money in January.

Investors who are interested in putting some money into this largely unknown sector should look at the iShares MSCI Frontier 100 ETF (FM). It tracks the performance of the 102 largest and most liquid companies that are based in frontier economies.

This ETF was launched in September 2012, so we don't have much history to work with. But, so far, it has rewarded investors handsomely with a one-year gain of 17.6% as of the end of January.

It can be argued that this fund isn't truly representative of global frontier markets. Over half the assets are invested in Persian Gulf states and the portfolio is heavily weighted towards financials (54.7% of the total).

Despite this imbalance, the ETF has attracted more than $500 million from investors during its short existence. Obviously, there is an appetite for more exotic forms of investing.

The risk factor here is on the high side. However, Frontier Markets have been outperforming since the beginning of 2013, and that is likely to continue, at least for the time being.

I am adding the iShares MSCI Frontier 100 ETF to our Recommended List with the caution that it is only suitable for investors with a high risk tolerance level.

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