International economist Dambisa Moyo gave a persuasive argument for why financial advisors should look at so-called frontier markets for investment opportunities and uncorrelated returns.

Moyo made her compelling case for investing in nations on the periphery of traditional emerging markets at the fourth annual Innovative Alternative Investment Strategies conference in Denver on July 22.

The average level of government debt in 11 frontier market nations, among them Turkey, Vietnam, Nigeria, Indonesia, Mexico, Iran and the Philippines, is 43 percent, compared with 90 percent in the U.S. and more than 100 percent in many European countries, Moyo noted.

Moreover, the demographic contrast between the West and frontier nations is dramatic. In Africa, for example, 60 percent of the population is under 25 years old. The problem of welfare and social insurance payments exists in the distant future, only if these countries embrace Western style programs. So far, many haven't. Europe alone accounts 7 percent of the world's population and 50 percent of its welfare and social insurance payments, Moyo said.

While traditional emerging markets have disappointed investors over the last year, frontier markets have defied that trend. For the year ending July 12, the MSCI Frontier Market Index has climbed just over 20 percent, while the MSCI Emerging Market Index has managed a miniscule advance of less than 3 percent. Moyo produced a Bloomberg chart showing the frontier market index closely tracking the S&P 500, which was up about 24 percent for the year ended July 12, while emerging market index collapsed late in this year's first quarter.

Moyo said these nations have the most potential for productivity gains in the next decade. The markets are starting to recognize this changing reality. While central bankers bite their nails whenever Spain or Italy has
to sell a lot of government debt, nations like Nigeria and Indonesia have to turn buyers away. Even Rwanda had a debt offering earlier this year that was seriously oversubscribed.