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Emerging market funds failing to make positive returns

Only 35 out of more than 2,600 emerging market equity funds managed to make money for investors over the past year, according to investment platform Rplan.

The company analysed the performances of 2,654 emerging market equity funds available to U.K. retail investors and found just 35 that delivered a positive performance in the year leading to February 22.

Rplan found returns across the funds ranged from 39 percent to minus 49 percent. Despite volatility in the sector related to concerns about China and the commodities bear market, 425 new emerging market funds were launched to investors last year.


Cristian Baitg | Getty Images

According to Rplan's chief investment officer, Stuart Dyer, the range of performances and number of funds shows the emerging market sector has become very disparate.

"One common theme between them though is the high risk – apart from 11 with risk ratings of four, all of the funds falls into the higher risk category of SRRIs," he said in a press release.

"Longer term, emerging markets can deliver very attractive returns but investors should be disciplined in their exposure to this asset class and should only have a limited exposure as part of a balanced portfolio."

Some investors remain enthusiastic about the potential for emerging markets. In a recent note, Nick Price, portfolio manager of the Fidelity Emerging Markets Fund, recommended stocks in China, India and South Africa.

"I am still optimistic about economic conditions and reform prospects in India," Price said.

"Despite weakness in Chinese and South African equity markets last year, very strong stock selection in these countries resulted in them being the biggest contributors to fund outperformance in 2015."

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