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The £426.7m Baring Emerging Europe trust, which entered the FTSE250 on 28 April, is currently the big performer among the booming emerging Europe funds. Over one year, it has gained 22.4 per cent against 8.9 per cent for its nearest competitor in the open-ended field, the £702.6m Jupiter Emerging European Opportunities fund. Over three years, it has outperformed the Jupiter fund by 4080 basis points.

But in the Jupiter vehicle’s favour, its volatility is much lower, at 6.1 as opposed to 8.0 for the Baring trust. And with two strong leaders in Russia, unpredictable politics in the rest of the CIS and possible economic weakness in the EU, investors may have questions about the risk manager Martin Majdaniuk has taken to achieve his returns.

Mr Majdaniuk says his chief concerns, in no particular order, are the global slowdown, minority shareholder rights and corporate governance in the CIS – and occasionally politics. To these he adds the unavoidable conundrum for this resource-rich region: is the commodity bull run sustainable?

The question is in a sense double-sided. High commodity prices do not necessarily lead to high share prices for all commodity producers. Oligarchs such as Roman Abramovich, Chelsea FC owner and major stakeholder in the trust’s top 10 holding Evraz Group, can augment or decimate company profits even if their products trade successfully.

But Mr Majdaniuk attributes the growth in east European hard commodity share prices to the two factors that have boosted hard commodity futures. Low supply and rising demand may not be viable in the very long term, he argues, but transportation bottlenecks and the hunger for infrastructure should sustain the trend for a number of years. According to Mr Majdaniuk, long-term construction projects are too expensive to abandon and managers will therefore persist with them to completion.

One of the chief beneficiaries of this activity has been Russian mining major MMC Norilsk Nickel, which as of 31 March was the trust’s fourth-largest holding. Norilsk has been cashing in on world demand for nickel and contractions of platinum and palladium supply in South Africa, which dominates the market.

Norilsk is by no means a risk-free investment. Oligarch Mikhail Prokhorov, who was arrested in France and later cleared as part of a prostitution investigation early last year, recently sold his 25 per cent stake in the company to Russian aluminium giant Rusal. Commentators have greeted this as a positive step, as Rusal may now merge with Norilsk to create a mining super-major. Mr Majdaniuk says the two companies could also merge with Metalloinvest, which is controlled by major Arsenal stakeholder Alisher Usmanov.

But like Mr Prokhorov, Rusal’s owner Oleg Deripaska will have to contend with a third oligarch shareholder in Norilsk, Vladimir Potanin. The risks incurred by Rusal are also unclear as the company is private and pulled its own IPO, citing market uncertainty.

These are just one example of what Mr Majdaniuk means by his concerns about corporate governance and minority shareholder rights. In the case of Norilsk, Mr Majdaniuk feels the risk is overstated and he is prepared to invest regardless. And to put these intrigues in context, mining investors face similar issues even in western Europe. Marketing arrangements with private trader Glencore have complicated a potential merger between UK-listed Xstrata and Vale, while Chinese aluminium producer Chinalco bought a large stake in Rio Tinto in the middle of BHP Billiton’s bid for the company.

The rich turbulence of resource politics may not be unique to emerging Europe, but fortunately for investors its consumer stocks present growth opportunities that are scarcer elsewhere. Mr Majdaniuk’s top 10 holdings in Russian bank Sberbank and Russian telecoms companies Vimpel Comms and Mobile Telesystems are outnumbered by the resource and energy plays that constitute the rest of his top 10, but he and other emerging Europe managers are content with their prospects.

Mr Majdaniuk is less enthusiastic about the outlook for the eastern EU and Turkey. Exposure to Hungary was 1.5 per cent at the end of March and has now gone down to zero. Poland, Czech Republic and Turkey are now underweights in the portfolio.

Turkey in particular is suffering a serious current account deficit and currently imports 80 to 90 per cent of its fuel, according to Mr Majdaniuk, not to mention the court case that has been brought against prominent political figures. “The ruling party could be dissolved, leading to an election and chaos,” Mr Majdaniuk observes.

Some emerging Europe fund managers tend to shy away from the smaller and mid-cap companies that would be more likely to suffer from this type of fallout. But Mr Majdaniuk is happy to have put 20-25 per cent of his fund into mid-cap equities, with opportunities in Polish retail, Russian and central European real estate, Turkish cement manufacturers and gold miners.

Some investors might have reservations about the liquidity of these smaller companies, but Mr Majdaniuk says he and his team assesses how easy they are to trade before he buys into them. “If we cannot trade the position within three to four working days, we would be very reluctant to invest.”

Although he says he has a 2 per cent position in Ukraine, for instance, he says he has not increased this partly because of liquidity issues. “Ukraine is relatively illiquid in terms of trading activity, and many comparable companies in Russia look cheaper with a similar growth profile,” he observes.

When Mr Majdaniuk came to the trust, he improved performance by reacting to market changes and cutting back on the smaller holdings at the tail end of the portfolio. Now, his chief challenge may be to anticipate when public and private politics will allow returns to crystallise. The Russian resource pendulum is unlikely to swing one way for ever and, if it turns, emerging Europe stock pickers will have to be more alert to other sectors than ever.