A King of the Wild Frontier

It would be an understatement to label James A. Harmon a contrarian investor. The chairman of New York-based Caravel Management, a so-called frontier-investing firm, is venturing into places where few others dare to tread. Caravel has put money to work in the world's most tumultuous markets: Lebanon and Pakistan, where deadly violence is endemic; Bangladesh, where dire poverty is exacerbated by a steady procession of cyclones and floods; and even Zimbabwe, where inflation has topped 500,000% as the economy teeters under the rule of President Robert G. Mugabe.

If it all sounds too bad to be true—well, that's the point. "The risks," says Harmon, "are overrated." Exploiting the gap between popular perception and market reality has been an immensely profitable undertaking. Harmon launched Caravel, named after 15th century explorer ships, in October, 2004, with $1 million. Now it has $150 million under management and is on track for $500 million by decade's end. Through Nov. 30, the most recent figures available, the firm had returned 224% net of fees since its inception, compared with 179% for the MSCI Emerging Markets index and 41% for the Standard & Poor's 500-stock index.