In a sign of how risk has been turned on its head in these turbulent times, only seven countries in the world have made money over the past 12 months and until recently even the most intrepid investor would baulk at putting their cash there.

The top performer, according to the index provider MSCI, is Lebanon, where hopes of a political settlement have pushed up the Beirut stock market by an astonishing 51% – although there have been signs in recent weeks that the consensus could be crumbling.

Next up is Jordan, considered one of the safer countries in the Middle East, with a return of 21% in local currency terms. The other countries on the list are either oil-rich Gulf states – Oman is up 14%, Qatar 12% – or they are in its economic hinterland – Tunisia has risen 23% and Morocco is up 2%.

I say hinterland because the Gulf states have been pumping their oil money into projects in North Africa. Emaar Properties, one of the companies behind Dubai’s building boom, is also one of the largest investors in the region. The United Arab Emirates will pump about $30 billion into Tunisia over the next 10 years, doubling the size of its economy.

This would seem to be an argument for the latest investment craze – Middle East and North Africa (Mena) funds – but I’m not so sure.

Financial groups have been falling over themselves to take a share of the action this year. Baring Asset Management recently launched a fund focused on the oil-rich region, while Schroders has been strengthening its Mena team awaiting an influx of cash.

Swiss wealth manager Julius Baer now has a North Africa fund offering exposure to Egypt, Morocco and Nigeria.

The investment pitch would seem to be a compelling one – these countries are among the very few that have delivered decent returns in a credit crunch that has even taken out the Bric (Brazil, Russia, India, China) markets.

China has been the worst-performing emerging market over the past 12 months, falling 49% as fears grow that its export-driven economy will be unable to escape a US-led slowdown. Russia’s oil-heavy market is down 43% and Brazil is off 27%, as is India.

The big argument managers used in favour of Bric and “frontier” markets was that they are, in the jargon, “uncorrelated” – they haven’t been around long enough to fall prey to the excesses of western capitalism.

I’ve written about so-called frontier markets before and the long-term prospects are undeniable. The problem is that in the short term they simply can’t escape the financial crisis. As Amr Seif, portfolio manager of Mena funds at Investec, put it: “In a bear market, there is nowhere to hide.”

Everything seemed rosy until April but then emerging markets, including these “final frontiers”, started to tank along with everything else. While Qatar and Oman may be up over the past year, neighbouring Kuwait is down 22% and Bahrain, Saudi Arabia and the UAE are off 8%. In Africa, Tunisia and Morocco are exceptions: Kenya is off 9% and Nigeria has dropped 18%.

Managers argue that this is just a short-term blip in a longer bull market: these countries have built up billion-pound slush funds thanks to the booming oil price and crude would have to fall back to $50 or $60 before they would have a problem.

The lesson of China, though, is that economic growth – it is still expanding at about 9%, if you believe the figures – does not necessarily translate into good stock-market returns.

The lesson of Brics is also that moving money into emerging market equities does not constitute a balanced portfolio. But with sales of UK and European funds in the doldrums, Brics and frontier markets were the industry’s last great hope.

The recent turbulence has shown that the only genuine balanced portfolio is one with cash, bonds and perhaps a little gold alongside equities. Advisers don’t get any commission from selling cash though, and fees on bond funds are a lot lower than on their equity counterparts.

So where in the world can you make money? Bonds and gold are looking expensive following the unprecedented flight to safety of the past few weeks.

Take another look at the equity performance tables and it might come as a surprise that, among developed markets at least, Britain and the US have done pretty well. Canada is the best developed-market performer, in local currency terms, with a fall of just 21%, but it is closely followed by Britain, down 26% and the US, down 27%.

If the global economy gets worse before it gets better, I’d want to be closer to home and there are some great British companies offering what will, with hindsight, look like fantastic value – BT, for example, is yielding nearly 10%.

If you like the long-term argument behind the frontier markets, you are better off putting in money now than you would have been earlier in the year – but do it for the long term and not because the industry is telling you it is a great way to beat the crunch.

Kathryn Cooper is editor of the Money section

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