Funds That Bet on Booming Emerging Markets
Besides holding investments in developed counties, the MSCI funds tend to focus on a few industries, including energy and materials. These sectors have been crucial for enabling countries such as Mexico and Chile to begin their rapid gains. But many natural resources companies are exporters that depend on sales to the developed economies. To benefit from the domestic growth of emerging economies, investors may prefer emphasizing companies in industries such as health, utilities, and consumer staples -- sectors that only play a minor role in the portfolios of the index funds.
For a greater stake in sectors that stand to grow along with domestic economies, consider a fund with big holdings in consumer stocks in the emerging markets. ETF investors may prefer EGShares Emerging Markets Consumer(ECON) , which tracks the Dow Jones Emerging Markets Consumer Titans 30 Index. Holdings include Brasil Foods (BRFS) , a dominant supplier of meat and dairy products, and Lan Airlines(LFL) , a Chilean company that serves growing markets in Latin America.
For an actively managed mutual fund that has more than 30% of assets in consumer stocks, consider Oppenheimer Developing Markets (ODMAX) . During the past ten years, the fund returned 17.6% annually and outdid 99% of competitors. Oppenheimer favors strong companies in growing sectors. The fund is particularly keen on retailing and consumer companies, says Alice Fricke, a client portfolio manager. "We want to own dominant companies that will take market share away from competitors," she says.
Another fund that focuses on domestic economies is Causeway Emerging Markets (CEMVX) . During the past three years, Causeway has returned 30.1% annually outdoing 93% of peers. The fund holds some small and midsized companies that depend on local markets. Many of these stocks are growing faster than big companies that depend on sales to sluggish developed countries, says Causeway analyst Joe Gubler.