From the January 2008 issue of Research Magazine • Subscribe!

January 1, 2008

Emerging Market Funds Lead Lipper Pack

Funds with a focus on China, Brazil, Latin America and India demonstrated consistently strong chart-topping performance through November 29, 2007, reports Lipper. And fund flows have been moving accordingly into international/global funds, the Financial Research Corporation says in its latest report for data through October 30.

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Top Equity Fund Returns

For 11 months ending Nov. 29, 2007:

-AIM China (83.58%)

-Direxion Latin America Bull 2X (80.38%)

-Nationwide China Opportunities (79.12%)

-Matthews China (72.76%)

-Guinn Atkinson China/Hong Kong (71.94%)

Source: Lipper/Reuters

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Top Equity Fund Inflows

For 10 months ending Oct. 31, 2007:

-Dodge & Cox International ($17.1 billion)

-American Cap Income Builder ($15.1 billion)

-Vanguard Total Stock Index ($14.2 billion)

-American Cap World Growth & Income ($12.6 billion)

-American Growth Fund ($10.6 billion)

Source: Financial Research Corp.

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AIM China (AACFX) had returns of 83.58 percent for the year to date, while Nationwide China Opportunities (GOPAX) was up 79.12 percent. On a 52-week basis, these two funds rose 104.18 and 95.56 respectively. Top holdings for these funds, as of September 30, included China Mobile, PetroChina and China Life Insurance.

Other fund companies with returns of more than 52 percent for China funds through late-November include Matthews, Eaton Vance, Dreyfus, Guinn Atkinson, Columbia, Oberweis, U.S. Global Investors, John Hancock and AllianceBernstein, notes Lipper. And many of these funds have grown 50 percent or more a year on average for the past two years.

Latin American funds dominate the three-year and five-year Lipper charts on an annualized basis through November 29. For three years, T. Rowe Price Latin America (PRLAX) had three-year annualized returns of 58.11 percent, while BlackRock Latin America (MDLTX) grew 54.13 percent. Other strong three-year performers include Latin American offerings from Fidelity and DWS Scudder.

BlackRock and T. Rowe Price topped the Lipper listings for five-year annualized performers, as well.

In terms of Brazil-Russia-India-China funds, Goldman Sachs BRIC (GBRAX) grew 63.16 percent in the 52-week period ended November 29.

Investors have taken note of these performance trends, and domestic stock market conditions have turned volatile. In the 10 months ended October 30, some $185 billion had moved into international/global funds (including ETFs) while just $43 billion had moved into domestic equity funds.

In October, nearly $10 billion flowed out of domestic equity funds. And $29 billion flowed into international/global holdings.

Overall assets in domestic equity funds stood at $5.1 trillion as of October 30, net of proprietary funds of funds. Nearly $2.2 trillion was held in international/global funds.

"Surviving higher volatility in equities and economic mood swings has been a challenge for investors," says David Goerz, CIO of Highmark Funds. "Yet, despite the recent uncertainty and market turbulence, the global economy has remained far more resilient than anticipated by the consensus." Highmark recommends overweighting global stocks (by 8 percent).

In terms of the 25 largest fund groups tracked by FRC, American Funds had some $1.2 trillion in assets, net of proprietary funds of funds, and inflows through October 2007 of $63 billion. Vanguard Group has $1.1 trillion and Fidelity $977 million with inflows of $60 billion and $6 billion respectively.

Franklin Templeton had year-to-date inflows (through October) of about $12 billion and assets of $336 billion. T. Rowe Price had net inflows of $17 billion in the first 10 months and assets of $241 billion, FRC reports.

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Janet Levaux is the managing editor of Research; reach her at jlevaux@researchmag.com.

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