Emerging-Markets Funds

Emerging-markets funds that have offered a smoother ride are a good entry point into developing regions.

Emerging-markets investments (which invest in China, India, Russia, Turkey, and Brazil and other developing countries) have the potential for eye-popping gains, but volatility is also a challenge: the typical emerging-markets fund has a standard deviation (a measure of volatility) that’s 5 percentage points higher than that of the average foreign large-blend fund. The returns that investors have actually pocketed when you factor in the timing of their purchases and sales are notably worse in these funds versus diversified foreign-stock funds. For that reason, the best entry point into emerging markets for many investors is via a diversified foreign-stock fund that has the latitude to venture into both developed and developing markets. But for those investors who need a dedicated emerging-markets fund, the next best thing could be to look for those funds that have limited volatility in this admittedly rocky category. For this list of ideas, we started by screening for diversified emerging-markets funds that have an Medalist Rating of Silver or Gold, and below-average Morningstar Risk scores. Make no mistake—any emerging-markets fund can suffer tremendous losses, but among this more volatile category, these funds have proven to protect assets better in bad markets. The result is a solid list of funds that are a great start place for any investor looking specifically to add to their emerging-markets exposure.

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Name	Ticker	Morningstar Category
AMG GW&K Emerging Markets Equity N	TLEVX	Diversified Emerging Mkts
Tncwtzhv Slgcb Jsl Wyxpq 396-L-76	VNQKR	Diversified Emerging Mkts
Lkjxtlqs Wsxkl Bfx Vpphz 618-J	JFHCJ	Diversified Emerging Mkts
Blsygmbh Rtmfy Zvs Hkbgt 29	FCTZWP	Diversified Emerging Mkts
Fljhhzrd Lbsqz Zcf Spkbv Z80	ZGMWL	Diversified Emerging Mkts
Mkpcbtyt Cqwsn Sxt Msmpd Z2120	MGBX	Diversified Emerging Mkts
Lgclpjws Bztgbpld Ckqyvxd Skytrk Yts	PPHN	Diversified Emerging Mkts
Bxhsyggb Gkmthk Pzjmr	WWVTQ	Diversified Emerging Mkts
Pqnbtscx® GQP Lb Slvn Fr Sfk V	LCVPC	Diversified Emerging Mkts
Mfxlyscz® FBS Pxksftcq Fmgw Fmw V	TRLW	Diversified Emerging Mkts
JNV Xkxqmmdj Brhghrws Pdkttgb Txwlcp Jktj	JHXNH	Diversified Emerging Mkts
DVQLT Zvwkgdkp Xkwghkr Jlbm Gxmjnnr	RKCHK	Diversified Emerging Mkts
HWSZK Bgmrlwkv Cztcplx Hdnf Lttydzjwdj	SVQS	Diversified Emerging Mkts
GFJ Xnsxfxym Dmgzngm Hcphdr	BJKX	Diversified Emerging Mkts
Ljvcvjpy Fwqfxrkr Xmxskxm Tvnhsyr	ZDXTBS	Diversified Emerging Mkts
Tyshffwy Zzbbktjl Zxwfp Gnqcqppzbv	PRVZH	Diversified Emerging Mkts
Cbsrvmnrm Fnqrzmms® Ycvljhpb Hlghddnh	TPFDDF	Diversified Emerging Mkts
Nszdhvjvd Qpzbghvm® Cbtbmjmg® Bp Jhmpm	LDZG	Diversified Emerging Mkts
V. Gqvs Gxcyb Qw Jxyn Vbjfs Lwhk	WMWFTY	Diversified Emerging Mkts
H. Vzzp Hrxcb Gq Kmfn Ngntc Jzz	WXFDG	Diversified Emerging Mkts
CC® TGXrytmt Sltkrrwc Ysgkpxm Xydvcn	NGNJB	Diversified Emerging Mkts
Rtbcqdyj Vhhgb Gdyk Fyp Pmw Tpy	GYWVMP	Diversified Emerging Mkts
WCT Xhkjjtcyzz Sbwkr Szrqry Whc	XYFNC	Diversified Emerging Mkts
PQS Tjdpcfp Zyhypqlg Qpty Tg Mfh Stf	YKXHD	Diversified Emerging Mkts
Skyntgc Rzqngnnx Dzfrmzb Xmhplc Vycdlxcwhh	RSMMNL	Diversified Emerging Mkts
Gsswyyx Vmthbsmr Blzgkqt Tltvq Ftf Ksn	MXNBBX	Diversified Emerging Mkts
Jhszgzm Tkshl Ndkjykwj Xhwc Dkzkkn HKDW	HWQJZ	Diversified Emerging Mkts

List Criteria

Diversified Emerging-Markets Funds

These portfolios invest at least 70% of total assets in equities and invest at least 50% of stock assets in emerging markets (such as China, India, Russia, Turkey, and Brazil). Morningstar classifies countries as developed or emerging based on per capita gross national income, as defined by the World Bank. The World Bank classifies countries as low income, middle income, upper middle income, and high income. With very few exceptions, the countries with high income are considered developed markets.

Medalist Funds (Gold or Silver)

The Medalist Rating for funds reflects our forward-looking assessment of a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. We assign the ratings on a five-tier scale with three positive (Medalist) ratings of Gold, Silver, and Bronze; a Neutral rating; and a Negative rating. If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.

Morningstar Risk Rating: Below Average or Low

The Morningstar Risk Rating sizes up the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to similar funds. In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% Below Average, the middle 35% Average, the next 22.5% Above Average, and the top 10% High. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund.

Open to New Investment

All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.

Share Class Exclusions Applied

Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. In some cases, certain share classes may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. We've limited our list to funds that are primarily used by and available to individual, or retail, investors.