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Mutual Fund News

Fund investors give emerging markets a second look

swon@globeandmail.com

What are we looking for?

Leaders and laggards among emerging-markets equity funds.

Stock markets in emerging nations took a haircut earlier this year amid concerns about unrest in the Middle East and rising interest rates in countries such as China.

Over the past three weeks, foreign fund flows have returned to this sector as investors fret over continuing economic problems in the United States and sovereign debt woes in Europe, according to U.S. fund-flow tracker EPFR Global.

The screen

We screened for the eight best and eight worst performers from Jan. 1 to April 14.

U.S. dollar, segregated, pooled and duplicate versions of the funds were excluded.

What did we find?

Funds investing in the BRIC countries of Brazil, Russia, India and China emerged among the leaders.

Claymore BRIC exchange-traded fund, which is 55-per-cent invested in Brazil and 30-per-cent in China, is up 2.6 per cent.

Templeton BRIC Corporate Class and HSBC BRIC Equity mutual funds, were essentially flat with a loss, respectively, of 0.2 per cent and 0.3 per cent.

Mark Mobius, manager of Templeton BRIC and Templeton Emerging Markets, still expects emerging markets to rack up a double-digit return this year, with BRIC countries leading the way.

"That is where the big money is," the veteran manager said in an interview.

The biggest surprise from investing in this sector has been the consistent high growth rate of 8 to 10 per cent in many countries, said the emerging markets pioneer.

"It's a big, big shock. ... When I first went into these markets, they were considered poor, underdeveloped and corrupt."

BRIC countries were also in the spotlight last week as their leaders met in China.

This year, the group invited South Africa to join their club, so they are now known as the BRICS. There are, however, no plans to add South African investments to the Claymore ETF or HSBC fund. Franklin Templeton Investments Corp. was mum on whether it will do so in its Templeton BRIC fund.

Interestingly, four of the top eight funds are ETFs or a fund that tracks an ETF. Both Claymore Broad Markets ETF, which is up 2.7 per cent, and iShares Emerging Market ETF, which is off 0.2 cent, are nearly 50-per-cent invested in the original BRIC countries.

*****

HOW EMERGING MARKETS EQUITY FUNDS HAVE FARED THIS YEAR

AssetsYTD % rtn3-mo % rtnAverage Annual % Returns (to March 31, 2011)
Fund nameMER ($-mil)(Apr. 14)(Mar. 31)1-yr3-yr5-yr10-yr15-yr
Best 8 to April 14
Claymore Broad Emerging Markets ETF0.4698.22.71.515.3----
Claymore BRIC ETF0.66343.12.62.811.5-0.7---
PwrSh FTSE RAFI Em Mkts Fdtl Cl A1.2328.92.51.618.2----
Brandes Emerging Markets Equity2.57199.6-0.10.011.68.48.4--
Tmpltn BRIC CC3.07433.0-0.20.412.72.59.7--
iShares MSCI Emerging Markets Index0.79--0.20.112.1----
HSBC Emerging Markets-I2.9816.0-0.3-1.28.3-5.10.75.80.9
HSBC BRIC Equity-I2.77115.4-0.30.44.7-2.0---
Worst 8 to April 14
CI Emerging Markets2.70189.1-5.0-4.89.2-1.73.46.56.6
TD Emerging Markets2.80210.7-3.6-3.88.8-3.42.79.14.7
AGF Emerging Markets2.991,409.6-3.3-4.112.16.79.112.07.2
Redwood Emerging Mkt Dividend Inc---3.2-3.3-----
Mackenzie Univ Emerg Markets Class2.53308.9-3.1-3.57.60.45.0--
Mackenzie Cundill Em Mkts Val Cl-A2.80266.9-3.0-6.419.7-8.8---
CIBC Emerging Markets3.00109.1-3.0-2.39.03.54.67.84.6
BMO GDN Emerging Market Ad Sr2.5517.2-2.6-3.312.7----
MSCI Emerging Markets Free ($ Cdn)-0.113.92.87.111.66.3
Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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