Money is flooding back into the biggest and broadest emerging
markets portfolios lately. The basic investment thesis is clear:
the emerging world is where the growth is. And so far, the
prophecy seems to be a self-fulfilling one.
[caption id="attachment_53551" align="alignright" width="220"
caption="Profit from emerging markets with ODMAX, GEGAX, EMGAX,
Last week alone, $1.7 billion in fresh capital flooded into
mutual funds and ETFs that concentrate on emerging markets. Most
of this money is being allocated to portfolios with a global
focus, while narrower country- and region-oriented funds are
As usual, we have seen ETFs -- the preferred vehicles of hedge
funds and other sophisticated investors -- lead the way while
"long-only" mutual funds take a more cautious approach.
If you believe that the mutual funds are gearing up to catch
up to the trend and benefit from a bigger share of the new money
flowing into the asset class, there's probably no time like the
present to investigate your options.
Start with the Oppenheimer Developing Markets fund (
), Aberdeen Emerging Markets (
), Wells Fargo Advantage Emerging Markets (
), RS Emerging Markets (
) and Russell Emerging Markets (
Funds like these reward a longer-term perspective -- and as
columnist John Waggoner argues, the
main reason to invest in emerging markets
is that more people are moving into the middle class in the long
term, "meaning they have more money to spend on consumer goods,
such as toothpaste." He backs this up by using the example of
Colgate of India, which saw a sales jump of 13% in 2011.
Jim Jubak agrees
Unlike indexed ETFs, which generally hold more or less the
same emerging markets stocks in slightly different
configurations, these funds are actively managed and any
portfolio in the category will behave very differently from its
This means over any given time frame, performance in the group
will definitely vary depending on the specific stocks managers
have bought or sold recently.
GEGAX, for example, recovered much faster from the
global market gyrations
of August, while REMSX was much slower to regain its footing. The
other three funds in our basket have tracked more closely
together over the last seven months, leaving investors to drill
down into fees and other considerations before making a
In any event, while all five of these funds have generated
double-digit returns so far this year, selecting the right fund
is critical. Are you interested in deeper emerging market mutual
fund coverage here at Emerging Money?
Let us know