Funds for Emerging-Markets Equity Shoppers

With emerging market returns trailing their developed peers this year, now might be just the time to consider one of these highly rated offerings

Adam Zoll 1 August, 2013 | 9:25AM Holly Cook

An otherwise good year for equities hasn't been so rosy for emerging-markets stocks. Led by fears of slowing economic growth in China, but also dragged down by lacklustre returns in India and Latin America, emerging-markets equity funds have been among the few equity losers of 2013. As of July 29, the diversified emerging-markets equity category had lost 6% year to date. Meanwhile, China-region funds had dropped 2%, with the India and Latin America equity-fund categories each losing about 15%.

Despite a rough first half of 2013, diversified emerging-markets equity funds were up about 5% during the 12-month period leading up to July 29—nothing to write home about, but not horrible. But with the S&P 500 up 24% during that time, emerging-markets stock funds—which tend to be more volatile than their developed-markets counterparts—look like laggards by comparison.

It's the continuation of a story that's been going on for a few years now, with the category modestly outperforming the index in 2010 and 2012 but experiencing steep losses in 2011, producing a three-year annualised return of a measly 1.2%. (Morningstar's John Rekenthaler noted in a recent column that despite the lacklustre performance of emerging-markets stocks, investors have poured $140 billion into traditional mutual funds and ETFs investing in them during the past three years.)

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About Author

Adam Zoll  is an assistant site editor with Morningstar.com, the sister site of Morningstar.co.uk.

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