In searching for no-load emerging markets mutual funds with a fairly recent record of outperformance, we found a surprisingly small number.

The primary criteria used for the screen was simple: funds must not charge a load and must have realized above-average one- and three-year returns relative to their peers in the diversified emerging markets group.

Mutual funds designated as institutional were excluded. Funds with special share classes or designated as leveraged or inverse were excluded too.

Though these limitations were modest in nature, just 20 mutual funds passed the screen as of September 2020. More than 750 mutual funds are classified as diversified emerging markets funds in the AAII mutual fund universe. Emerging markets are developing countries in a fast-growing phase. Of the emerging markets funds, only one-third are not institutional funds or designated as having a special share class. The requirement to be a no-load fund narrowed down the list of potential candidates to just 65. The small field was reduced even further once performance requirements were added. Had all passing funds been required to be open to new investors, four more would have been eliminated. The list of passing funds is ranked by one-year return.

Even without loads, none of the passing funds are cheap. Just one, Fidelity Emerging Markets (FEMKX), has an expense ratio below 1.0%. The higher expense ratios reflect, in part, the higher cost of investing in such countries. Those seeking a lower-cost way of getting exposure to emerging markets may wish to see the accompanying ETFs First Cut in this issue.

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The Rationale for Investing in Emerging Markets