20 Best Emerging Market Funds (2023)

The ‘collective west’ has been hit hard by rising interest rates worldwide…

We frequently cover the growing power of BRIC nations, everywhere from China to sunny Latin America 🌞, such as HSBC’s serious hit from leaving Russian markets.

But did you know?: Lately, developing markets' results have been more inconsistent. Similarly to other industries, the ‘collective west’ has been hit hard by rising interest rates worldwide and the aftermath of Russia's invasion of Ukraine.

Emerging markets account for a significant percentage of the world's stock exchanges, roughly 12%. Financial experts warn that only the most risk-tolerant stock and share traders should consider investing in developing markets, and even then, only as part of a small percentage of the whole portfolio (no more than 5 per cent).

How to Buy a Top-Rated Emerging Market Fund (Only 10 Mins)… 

It takes less time than you probably think to open an emerging markets account. If done efficiently, it can take 10 minutes to complete this process:

20 Best Emerging Market Funds (2023)

Among EM providers, Vanguard provides some of the best value-for-money funds. Investors normally buying individual stocks are drawn to these funds because of their low expense ratios and minimal broker fees.

Investors may create a diverse portfolio with only Vanguard ETFs, which provide everything from specialised emerging sector funds to entire market funds. Vanguard offers more than 80 low-priced alternatives. 

In this piece, we'll also teach you how to build the best fund allocation for diversity preservation. Because of their low-cost ratios and low emerging market management fees, Vanguard's EM funds are very popular among investors.

Vanguard provides some of the best value-for-money funds.

1. Silver Emerging Markets ETF (JPM)

Leon Eidelman has handled strategy management since July 2016. He has the help of JPM's Fundamental Emerging Markets team leader Austin Forey, who is renowned in his field. The emerging markets and Asia-Pacific equities team, at 92 people strong, provide a strong backup to management.

There is a consistent emphasis on high quality and rapid expansion. The bulk of the portfolio is made up of high-quality, market-leading companies that are based in promising sectors with manageable exposure to outside forces, and which generate substantial amounts of cash flow. Overall, the strategy has been historically underweight in energy and materials companies compared to the index.

Because of their historical track record of outperforming the market and their current position as industry leaders, foreign investors continue to be drawn to U.S. stocks. But this is changing somewhat over time. And this fund gives access to the swinging pendulum. 

Based on the emphasis on quality growth, this approach could do well in earnings- and fundamentals-driven years like 2020. When growing technology and internet-related firms sell down after success in previous years, as happened in 2021, the approach is likely to underperform since commodities sectors prospered.

It is important to note that as of June 2022, the strategy has around $38 billion in AUM. Due to legal constraints, the Luxembourg-domiciled vehicle and the US mutual fund are both still available but are not actively seeking new investors. The UK-domiciled vehicle is still open but is not actively seeking new investors.

Do you know the stock market’s hours? 💤

2. GQG Partners for Developing Market

Investing in developing markets, which have a less historical correlation with U.S. equities, might be a smart choice as diversifiers in light of the present commodities and liquidity problems in the Collective West.

Those traditional funds are in greater danger than ever of collapsing due to internal strife and external economic rivalry among major nations. GQG Partners Developing Markets Equity, also a Silver Morningstar pick, is another excellent option for those interested in emerging markets.

Rajiv Jain brings his knowledge, wisdom, imagination, and track record to bear on the plan. Until late 2016, Jain held the position of manager at Vontobel Asset Management, overseeing the effective operation of the Virtus Vontobel Emerging Markets Opportunities fund. 

Fund Team

Jain has a strong team of 17 analysts behind him. While some analysts may draw on specialised knowledge from prior experience, all analysts have broad knowledge and skill sets.

Rajiv Jain takes a “quality growth” strategy, which involves a search for expanding businesses that are also financially stable and have shown their resilience during times of economic slowdown.

Companies with strong returns on equity and assets and low to moderate leverage are thus of particular interest. Over- or under-weighting industries or nations is possible. Although Jain tends to keep equities for the long haul, he isn't afraid to make a dramatic shift in strategy when the time is right.

As of March 2022, this strategy will have almost $25 billion in assets under management (AUM). Jain's Vontobel emerging-markets fund was much bigger, and there don't seem to be any issues at the moment, but this is something to keep an eye on.

This fund offers more room for China, India, Brazil, and other BRICS+ emerging countries as it might have larger exposure to South Korea.

Guide: 2023’s top Index fund

3. Schroder International Selection Fund (ISF) China Opportunities

From August 1, 2013, Louisa Lo, Head of Greater China Equity Investments, has been responsible for the strategy. She has been working in the investing industry for a total of 28 years, 25 of which have been spent at Schroders. Seventeen people on the Greater China study team back her up, helping to place your extra savings somewhere profitable.

Across various Schroders Asian stock products, Lo applies a quality-growth-oriented investing approach that has been tested and confirmed over numerous market cycles. Analysts evaluate a company's growth possibilities by comparing the ROIC and WACC, made possible by a solid and well-defined framework.

Our confidence in Lo and her ability to follow a tested investing methodology makes this an attractive option among our recommended Chinese stocks. You won’t find Tesla (TSLA) but you could find stocks like Alibaba, the Chinese equivalent of Amazon (AMZN).

4. FSSA China Growth 

Martin Lau, the portfolio manager, has been in charge of this approach since April 1, 2002, and he has 26 years of expertise in the investing industry. He has shown time and time again to be a shrewd investor, demonstrating both a high level of expertise and a genuine interest in the field.

Lau oversees a team of 23 financial experts, with 12 years of expertise on average. The investment team culture is robust, focusing on investor satisfaction and succession planning that you can connect to your digital bank provider.

Over the long term, Lau's Asian and Greater China equities mandates have performed very well thanks to his bottom-up stock selection approach. The strategy focuses on finding strong growing firms that are reasonably valued, focusing on the calibre of their leadership.

The investing method is also characterised by its emphasis on absolute return, its minimal portfolio turnover, and its disregard for benchmarks.

As of September 2021, the FSSA team's Chinese equity franchise had grown to $10.6 billion and had been soft-closed, meaning it was no longer being sold. The group was primarily motivated by the capacity limitations they saw in the A-share market.

The fund's liquidity profile has been consistent over the last year, which is encouraging, and the staff has a history of successfully hard-closing other funds.

5. Aubrey EM Opportunities 

It uses a “thematic” approach to investing to capitalise on developing economies' expanding middle classes via purchases of goods and services.

This sets it apart from other funds that have historically seen developing nations as places to invest in because of their potential as export-oriented, budget manufacturing centres.

A large portion of an investor's portfolio is often allocated to stocks of firms providing both discretionary and essential goods and services to consumers (about 50% to 60%). Other topics include financials and communications services.

freedom from the constraints of a standard index. That is to say, the portfolio may, if it so chooses, make larger bets on particular nations than they would in the benchmark.

Note, this EM fund is biased in favour of India. As of June 2022, 36% of the fund was invested in Indian firms, despite India accounting for just 13% of the MSCI Emerging Markets Index. Earnings per share growth, return on equity, and cash return on assets must be at least 15% for a company to qualify. 

Middle-class populations in fast-developing nations like China and India are expected to rise substantially over the next several decades, making the purchasing power of emerging market consumers a potentially lucrative investment issue.

Investors interested in capitalising on this topic in particular, as well as those who are optimistic about India's future growth, might find this fund attractive.

6. Fidelity Emerging Markets 

Nick Price, Fidelity's manager, relies on the firm's large regional specialised teams in Latin America, Asia, Africa, the Middle East, and Europe. 50% of the portfolio must be invested in stocks with a history of providing stable returns. The portfolio comprises three major themes: technology, finances, and materials.

When looking to invest, who should you go to, when you’re seeing the developed nation UK downgraded to an AA rating? Exposure to developing markets may be anchored with this product. Investors searching for the stability and resources of a big player in the asset management industry may want to give this some thought. 

7. Redwheel Global Emerging Markets

John Malloy, who leads a team of 23 at the investment boutique Redwheel (formerly known as RWC Partners), employs a strategy that considers both the macroeconomic and political climates in these regions to identify key themes through stock selection. The firm also incorporates environmental, social, and governance (ESG) evaluation into its research process.

The fund will focus on areas such as innovative automotive technology, financial inclusion, and 5G telecommunications. This fund diversifies its holdings across both developing and frontier economies, making it a potential option for long-term investors with a high-risk tolerance who are wanting to add variety to their investment strategy. 

8. Utilico Emerging Markets Trust

Around two-thirds of the trust is allocated to equity investments in utilities and infrastructure in developing market countries.

This includes water, sewage, waste, power, gas, telecommunications, ports, airports, highways, and railroads. Infrastructure development is a significant subject in emerging markets, as fast-growing nations attempt to modernise their economies. Ports and logistics provide the greatest risk, followed by energy and digital infrastructure.

Brazil represents 20% of the trust's total international exposure. Compared to other emerging market funds, its 30% allocation to Latin America is much higher.

9. JPMorgan Emerging Markets

The bank seems risk-averse when it comes to investing in developing economies. Investing mostly in high-end, quality-guaranteed assets is the reason behind this. It seeks for sectors with little exposure to external shocks, solid market positions, and healthy cash flow generation and balance sheets.

As a result, the fund often doesn't own any energy or commodities firms, which are vulnerable to market fluctuations. The fund oversaw $38 billion in assets as of June 2022. Use the ticker symbol in your trading account to find this fund.

10. iShares Emerging Markets ETF

The fund is among numerous emerging market exchange-traded funds (ETFs) managed by iShares. It has over $50 billion in assets under management and a stock list of over 2,500 companies from across the globe.

Stocks from all across the world are included, although the focus is mostly on East Asian companies like Samsung, Alibaba, and Tencent. The fund, on average, has returned 11.75 per cent every year as of October 5, 2022.

The fund's greater than 60% year-over-year increase may be attributed to its heavy investment in the Chinese economy, which has witnessed significant expansion in recent years.

Fees are charged by most of these funds so that the skilled professionals who administer the fund and make investment choices may be compensated. The fund's cost ratio is only 0.09%, making it affordable for many investors. This is encouraging news, but it doesn't mean you should hurry to invest your emergency money.

11. iShares India ETF 

India's economy is expanding at a rate that makes it one of the quickest-growing developing economies today. It has a population of about 1.48 billion, making it the world's most populated country after China.

There are 96 Indian firms included in the iShares ETF, including global powerhouses like Reliance Industries, Infosys, and Tata Consultancy Services. With a total of $5 billion under management and a 5-year average return of 10.1%, this fund has an expense ratio of 0.69%, which may seem expensive for a passive fund.

12. iShares Brazil ETF

iShares offers an opportunity for investing in the expanding Brazilian market by creating a fund that invests only in Brazilian firms. Since January 2022, Paul Whitehead has been the fund's manager.

Its economy is expanding swiftly, however, it hasn't grown as quickly as China and India.

Compared to other emerging market funds, this one has a more narrow and precise investing approach. For instance, the corporation has a sizable stake in Vale, the largest mining firm in Brazil and a major player on the global stage. Because of this, Vale has considerable influence on the fund's performance.

With an annualised return of 7.1% over the last five years and a return of 44.9% over the past year, the iShares Brazil ETF has been a profitable investment. The annual cost ratio of the fund is 0.59%. If you want to add diversity to your Apple (AAPL) shares, this is an interesting fund. 

13. iShares China ETF

This fund follows the stock performance of the major publicly traded Chinese corporations. Thirty per cent of the money is invested in companies like Alibaba and Tencent. Yet, the fund still holds over 600 more Chinese equities.

Together, it has jurisdiction over more than $6.7 billion in assets. The fund has done well recently, returning 42.8% in the last year, and it has returned an average of 15.4% during the past five years.

14. VinaCapital Vietnam Opportunity 

According to the VinaCapital website, the net worth of the fund's assets is more than £1 billion, the vast majority of which is invested in listed stocks, making it the only investment fund that only lists Vietnamese firms.

Also, the fund may hold private and unlisted stocks. As these characteristics are unusual in developing market funds, they may appeal to certain investors. Since its debut in 2003, the VinaCapital Vietnam Opportunity Fund has generated a return of 1,550.7%.

15. Templeton Emerging Markets Investment Trust

To diversify its holdings, the fund may also purchase shares in unpublicized businesses. Basically, this implies that buying into the fund will provide you access to resources that you wouldn't have otherwise.

In fact, the fund has returned 52.4% annually to the company over the last decade, suggesting that this strategy is successful. eToro lets you trade EM funds: eToro review.

16. Columbia EM Core ex-China ETF

Stocks of up to 700 businesses based in developing economies are included in the index, but those based in China or Hong Kong are excluded to give broad, core emerging markets equities exposure. There is no diversification.

17. American Funds New World Fund Class A Fund 

NEWFX was managed by Capital Research and Management Corporation and has $59 billion in net assets as of the first quarter of 2021. NEWFX has a cost-to-trade of 1%.

At least 35% of NEWFX's total net assets are typically invested in equity and debt instruments of issuers predominantly situated in countries the fund's advisor classifies as emerging market economies.

According to NEWFX's Q1 2021 portfolio breakdown, the US accounts for 21.7%, China for 14.6%, Brazil for 6.4%, India for 7.0%, Japan for 5.0%, and France for 5%. For the portfolio as a whole, equities in the information technology sector accounted for 16.9% of the total, with the rest being consumer discretionary, financials, and healthcare.

Those with a high tolerance for risk and a lengthy time horizon who want exposure to the stock and bond markets of developing market nations might consider NEWFX.

18. Vanguard Emerging Markets Stock Index 

For its investors, the Vanguard Equity Investment Group-managed Emerging Markets Fund aims to equal or exceed the ROI of the FTSE EM Index.

VEMAX Vanguard ETF uses an indexing technique to help it reach its financial goal. Over 95% of the fund's total holdings are invested in common stocks of firms included in the FTSE Emerging Market Index under normal market circumstances.

As of the first quarter of 2021, VEMAX's total net assets were above $81 billion. China accounts for 42.5% of the portfolio, followed by Taiwan at 16.0% and India at 9.6%. Tencent, Alibaba, and Taiwan Semiconductor are its three largest investments.

High-risk investors who want exposure to common stocks of firms based in emerging nations might consider the fund. Investors who want to spread their risk around might consider VEMAX as well.

19. Oppenheimer EM Fund 

This portfolio requires a minimum investment of $100 per investor and has a 1.22% yearly net expense ratio. There were $52.3 billion in the fund's holdings in the first quarter of 2021.

Most of the fund's assets are invested in common stocks issued by corporations operating in developing and emerging market countries. At least 80% of its net assets are typically placed in the equity securities of corporations operating in emerging regions.

Its manager's strategy is to put money into the common stocks of developing firms with growth prospects higher than the global GDP (GDP).

More than 25% of the portfolio is invested in Chinese stocks. The following countries have a significant share in the portfolio as well: India (10.8%), Russia (9.4%), and Mexico (7.4%). Almost half of the portfolio is in stocks of companies in the discretionary spending of consumers and the banking industry.

The Oppenheimer Developing Markets Fund Class A fund invests in a diversified portfolio holdings issued by companies based in developing and emerging market countries, similar to the other emerging markets funds discussed below.

20. T. Rowe Price Emerging Markets Stock Fund 

T. Rowe Price Associates, Inc. serves as an adviser to PRMSX. This fund has a yearly cost ratio of 1.21%. A minimum of 80% of PRMSX's net assets are invested in common stocks of developing market firms under normal market circumstances.

To achieve its long-term goals, the fund employs a growth strategy and invests in firms that have shown the ability to increase profits, cash flow, and book value year after year. As of the first quarter of 2021, PRMSX has $13.3 billion in total net assets.

China accounts for 33.20 per cent of PRMSX, followed by Brazil (7.60 per cent), and South Korea (12.80 per cent). Although the fund does provide exposure to varied industries, more than half of its holdings are common stocks of corporations in the finance & IT sectors.

PRMSX is appropriate for long-term, high-risk growth investors who want to obtain exposure to inexpensive common stocks of corporations in developing nations. If you're an investor looking to diversify your portfolio and maybe increase your profits over the long term, PRMSX is an option to examine.

Best Emerging Market Funds: Buying Guide

Most investors know the positive impact of developing economies on the world economy, but this awareness has not translated into increased exposure to these regions. Please explore the following five points as to why we believe investors should look at developing markets.

1. Returns

Whether you're looking at stock or bond returns, developing markets have produced some of the finest this century. Although emerging market bonds have outperformed their British and worldwide peers in terms of return since 2001, this outperformance has come at a substantial premium in risk.

Again, when comparing equity performance, emerging economies outperform their global peers. The increased risk is not as noticeable in stocks as in bonds.

This century, investors who took a chance on developing market shares and bonds would have seen better returns on their money. Risk, as assessed by the volatility of returns, shows why emerging markets are best used to complement a broader investment strategy rather than as a stand-alone component. The second justification follows from this one.

2. Diversification

Investments in developing economies are independent of one another. The connection between them is modest even among asset groups. Bonds in emerging nations are far less connected with bonds in Britain and the rest of the world than in developed countries. Similar trends may be seen in developing market stocks.

Due to periods of high performance for certain asset classes and low performance for others, diversification is crucial. We saw cumulative returns of the aforementioned asset groups every five years since 2001. It's a perfect example of why variety is so crucial.

Secondly, there was a better connection between British shares and equities in developing nations since both did well during the commodities boom at the turn of the century. Yet, after the GFC, overseas stocks did better, and emerging market stocks were more stable than British stocks all the way through 2017.

Investment troughs may have been mitigated and gains shared by investors by spreading their money among the equity markets of Australia, developing markets, and the rest of the world.

During the Global Financial Crisis and COVID-19, when interest rates on bonds were already at record lows, investors were grateful for the diversification that developing market bonds offered.

3. EM Market Size

The disparity between developing nations' economies and capital markets' sizes is a key argument for a long-term commitment to the sector.

Moreover, these capital markets are developing, with some showing signs of becoming as robust and competitive as developed markets.

Emerging markets are home to 87% of the world's population. Although these economies provide more than half of worldwide GDP, their stock markets account for only 13% of the total value of all publicly traded stocks worldwide. Long-term investors may benefit from this discrepancy since as developing nations expand, so will their capital markets.

4. Heightened economic growth rates

To reduce their risk in case of a downturn in the Australian economy, Australian investors are increasingly looking elsewhere. Figure 3 shows that the Australian stock market is cyclical.

Although Australia is slowly recovering from the effects of the COVID crisis, other economies are doing so at a far faster rate. Already, interest rates are being raised in certain developing market nations in an attempt to slow down their economies.

Issues relating to inflation, growth, and tail risks in both developing and developed economies were discussed at recent IMF Meetings. Several developing economies, however, are in a better position than they were during the last crisis because of the policies they have put in place.

Moreover, the IMF forecasts that emerging market economies will expand faster than developed economies in the future.

5. Discounted valuations

As measured by the standards often used in the West, developing markets seem like a bargain. To account for the greater uncertainty surrounding them, developing markets often trade at a discount to more established ones.

Price-to-equity (P/E) multiples in developing and mature markets have remained relatively stable at levels around those seen in 2017. It seems like emerging markets are getting ready to finally explode.

Successfully Navigating Developing Markets

Domestic variables have a significant effect on the equities and bond markets of emerging nations, proving that this group is not a homogeneous whole. Because of this, it's crucial to exercise caution while engaging with developing markets.

This is why non-conventional strategies, such as active management and smart beta, are essential. It enables financiers to steer clear of emerging market economies and industries with shakier fundamentals and instead focus on those more protected from the geopolitical shocks that might affect these developing countries.

Despite the attractiveness of developing markets as a whole, not all of the corporations operating in these markets are good investments. Many of these corporations are state-owned monopolies, and their inefficiencies provide opportunities for savvy investors.

Investing in developing markets entails risks related to things like interest rate fluctuations, issuer default, currency hedging, credit ratings, nation and issuer concentration, liquidity, fund management and fund operations, and changes in trading times. 

Our Conclusion…

It takes little time to open an emerging markets account. If done efficiently, it can take 10 minutes to complete this process. If you missed it the first time, here it is again:

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