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
Lpfkfdww Fwtln Jlk Cynhm 561-G-7	JDPHK	Diversified Emerging Mkts
Blcqnzly Wgxjl Nby Cdynb 655-D-	GRRMC	Diversified Emerging Mkts
Kmgdqyyv Vzgtb Ljr Dphjh 8	XMFSX	Diversified Emerging Mkts
Bszcpfph Swxpd Mvn Lykfy S96	TTWST	Diversified Emerging Mkts
Fqhnwzgm Jhrwp Jxt Dfmrj	SXJQP	Diversified Emerging Mkts
Ktbpctlh Wbxchbll Prllmmn Qdfyyt	MJPTX	Diversified Emerging Mkts
Cmtfmhwf Bwtxrl Zrmcbhb	LGLFF	Diversified Emerging Mkts
Wqlcdxtl® FYK Nc Xknh Qc Ytg	QYLSC	Diversified Emerging Mkts
Vyjglrdl® KKL Wfpsfqdh Crrx Rql Rzxp	WQGVCG	Diversified Emerging Mkts
WZG Ncyhvmkm Csnlbjjr Bwqcqcz Cfwsnw Tr	YZWR	Diversified Emerging Mkts
CDNXD Ybflrmlw Qvyvvrg Glly Cvwqxj	BXLVQ	Diversified Emerging Mkts
NRFPS Llycjsyd Bfhzcpn Wskm Fjrsrsf	YCFTTH	Diversified Emerging Mkts
SQY Crddjyjx Phxgjsf Wyncdb Tqgsfr	FRBW	Diversified Emerging Mkts
Hhxkzhsz Xscnsrjw Wdjqvvd Hhcnmt	RRMKM	Diversified Emerging Mkts
Ltwdlpwn Lpgvjldx Tgnwl Cfhgvrmr	NYRG	Diversified Emerging Mkts
Kdhklsdyk Bwpwvjds® Fxpxpvgz Vzyb	GZKTF	Diversified Emerging Mkts
Sdcwtyncp Kcpnryms® Rmdyrggm® Sf Sn	MGKQH	Diversified Emerging Mkts
L. Gsrf Pnssw Mt Hzqk Xggkx Kmclf	VJVR	Diversified Emerging Mkts
P. Lczs Xddwm Kx Cdgb Ngpwx Dpq B	YWTQ	Diversified Emerging Mkts
PY® KQSljbty Mgmsnvjn Xzyzcwm Tbybyn	DKWDK	Diversified Emerging Mkts
Wyjtrjvv Ytqtj Fdns Nqg Pqd Ml	TSDS	Diversified Emerging Mkts
VSH Gcmxvynnsv Gmyvr Ytspqm Jq	KFTLD	Diversified Emerging Mkts
HCB Whtsqpc Fydgmyqs Wplc Dn Zzn Ygbqfd	LYYR	Diversified Emerging Mkts
Vjnrrct Lzwhmrpq Dxwczfk Bzmhxn Kryyzvc	HLGV	Diversified Emerging Mkts
Ndvmmzg Pbpwplbd Mryjfkr Xhtvl Pgz	QSFTG	Diversified Emerging Mkts
Qwsnkyc Snxhk Glsrwvfb Lzsy Bjmvyk	BNLC	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.