There are a number of ways investors may be able to boost their ISAs by embracing more risk in the hope of being rewarded with enhanced returns over time. Here are some examples for the more adventurous investor:

1) Emerging markets

The idea here is to put your money in areas of the world that are developing rapidly. However, they can be volatile as they’re investing in more unpredictable countries and companies.

Aubrey Global Emerging Markets Opportunities

This fund aims to generate attractive returns by investing in companies that are focused on the growth in consumption and services in emerging markets. Lead manager Andrew Dalrymple focuses on rapidly growing sectors in countries with political and economic backdrops conducive to income growth and consumer confidence.

He particularly favours companies with market dominance and prefers local leaders, with cashflow returns that can support growth, at reasonable valuations.

According to the fund’s latest factsheet, India accounts for 44% of its asset allocation and China has 39.5%. There is no direct exposure to Russian assets.

2) Smaller companies

You can also buy a fund that focuses on smaller companies. Part of the attraction is that you’re exposed to innovative young firms that are off the radar of many investors, and they have good growth prospects ahead of them.

Artemis US Smaller Companies

This fund, which has been run by Cormac Weldon since launch, reflects the manager’s view of the US economy. It will typically hold around 50 to 70 stocks to strike a balance between being focused but diversified enough to mitigate volatility. In a recent update, the manager pointed out that data on US growth continues to be positive, even though there is some slowdown from the rapid rate of expansion seen in early 2021.

“The labour market remains strong with unemployment having fallen to 4.2%, the lowest since the pandemic began – and the participation rate rose slightly albeit it is still below pre-pandemic levels,” he added.

3) Concentrated portfolios

Another popular way of spicing up a portfolio is by investing in funds that are extremely concentrated. This means they focus their attention on a small number of companies – sometimes as few as 20 – which they believe have the best chance of delivering tremendous returns.

BlackRock European Dynamic

This fund, which is managed by Giles Rothbarth, invests in companies of all shapes and sizes across Europe. It favours those that are undervalued or demonstrating good growth potential. It invests in companies with medium to long-term earnings power that’s greater than the market, as well as those in restructuring or turnaround situations.

The portfolio is relatively concentrated as it typically holds between 35 and 65 stocks. According to its latest factsheet, it has a decent geographical spread. This is led by France with its 19.65% share of assets, followed by Switzerland, the Netherlands, and Denmark.

4) Special situations

There are so-called special situations funds. Many of these will invest in companies that have been through a difficult period but are showing evidence of a turnaround in fortunes. The potential downside, of course, is that these companies may have suffered problems for a reason and there’s no guarantee they will be successful in their transformation attempts.

Ninety One UK Special Situations

This fund aims to deliver capital growth by investing in unloved UK companies that the managers believe are undervalued. The investment process is best described as contrarian, and the team begins its search for new ideas by looking at shares whose prices have fallen substantially from their peak.

It will then undertake detailed fundamental analysis, sifting out the genuinely troubled businesses from those which have been misunderstood by the market. The managers believe these companies are seldom out-of-favour forever and can generate strong returns as they are rehabilitated.

Darius McDermott is managing director of Chelsea Financial Services & FundCalibre