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Emerging Markets Give These Funds an Edge

Two funds whose regional leanings expose them to developing-markets downturns.

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Emerging markets have continued their volatile ways in 2014. After starting off the year sluggishly, most of them surged during the spring and early summer, and the MSCI Emerging Markets Index was up 11% for the year through Aug. 31. But Brazil, South Africa, South Korea, and several other developing exchanges sold off sharply in September before rallying slightly in October and then slipping again over the past few weeks. All told, the MSCI Emerging Markets Index has gyrated its way to a 0.54% return for the year to date through Dec. 1.

Diversified and regional emerging-markets funds are always vulnerable to meltdowns in the developing world, of course, but many foreign large-cap and foreign small/mid-cap funds would be exposed to such a downturn as well. The typical foreign large-cap fund has 10% of its assets in emerging-markets stocks, while the average foreign small/mid-cap fund has 14% of its assets there. Many prominent foreign-stock funds own considerably more, including  Janus Overseas (JAOSX) and  Virtus Foreign Opportunities (JVIAX).

William Samuel Rocco does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.