One of the world's most successful investors has a big bet going on Ukraine. It could prove to be a big mistake.

Michael Hasenstab, a portfolio manager at Franklin Templeton Investments, has won many prestigious awards in the fund management industry. He has consistently outperformed his peers, delivering an annualized total return of 7.1 percent on his bond investments over the past 12 years, according to data provider FE Trustnet. The Irish Independent reported that he made $2.6 billion for his investors by accumulating about 10 percent of Ireland's government debt in 2011 and 2012 and making a windfall as the nation stepped back from the brink of default.

Now Hasenstab has a much riskier gamble going in Ukraine. As of Sept. 30, Templeton funds managed by Hasenstab held Ukrainian government bonds, denominated in dollars and euros, with a market value of about $3 billion. Even before more than half a million anti-government demonstrators took to the streets of the Ukrainian capital, Kiev, the country's creditworthiness was not looking good.

With its foreign currency reserves shrinking, the government faces nearly $10 billion in principal and interest payments next year and more than $13 billion in 2015, according to data compiled by Bloomberg. On Nov. 1, Standard & Poor's downgraded Ukraine's long-term sovereign debt rating one notch to a B-. According to Deutsche Bank, the market for credit default swaps suggests Ukraine has the third-highest default probability in the world, after Argentina and Venezuela.

The spreading protests, motivated by police violence and the government's decision to halt a trade deal with the European Union, have only made things worse. The price of the 10-year Ukrainian dollar-denominated note is down about 5 percent from a week earlier, according to Bloomberg data. The yield on a note maturing in 2014 has shot up to about 19 percent, from 13 percent a week ago.

The protests will further complicate the government's relations with the International Monetary Fund, which had been helping to finance Ukraine's budget deficit. The IMF is demanding cuts in energy subsidies to households as a condition for further loans -- something the government is reluctant to do for fear of fueling more protests.

Hasenstaub, a Ph.D. who relies heavily on economic analysis for his investment decisions, is undoubtedly aware of the country's financial difficulties. But he's not looking at the numbers alone: He insists that in-depth local knowledge is needed to make the right bets. "You can only do so much behind a Bloomberg screen," he once told the Financial Times.

It is the unreliability of local intelligence that may trip up the ace bond investor. Ukraine, always torn between East and West psychologically, politically and economically, is much less predictable than an EU country such as Ireland or Hungary.

One crucial question is how long President Viktor Yanukovych and his government can hold out. The president is scrambling to pull together enough money to placate the electorate before the next presidential elections in 2015. He's currently in China, which might provide a few billion dollars for specific projects. He can also expect a payoff from Russia for nixing the EU trade deal -- though it's possible that haggling over the terms is still going on as the Kremlin assesses developments in Kiev.

The chaotic opposition might be better off if Yanukovich hangs on until the 2015 election -- a real possibility now that the cabinet of Prime Minister Mykola Azarov has survived a no-confidence vote. With the economy in such a sorry state, this is not the best moment to come to power. Momentous events like a default or a devaluation of the national currency, the hryvnia, expected by the S&P next year, would only play into the hands of Yanukovych's rivals.

Hasenstab has insured himself against devaluation risk by investing in foreign-currency-denominated bonds. Even a default would not be a disaster for the $70 billion Templeton Global Bond Fund, which has only a small fraction of its assets invested in Ukraine. The star manager's reputation for contrarian brilliance, however, could suffer -- a minor casualty in Ukraine's quest for national identity.

(Leonid Bershidsky, an editor and novelist, is a Bloomberg View contributor. Follow him on Twitter.)