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TheStreet Open House

Emerging Markets Funds That Stayed Afloat

Stocks in this article: PGJ ECON DGS VWO EEM NPSNY ABV BIDU

EGShares Emerging Markets Consumer ETF holds some of the strongest names in the sector. A holding is Naspers (NPSNY), a South African company that provides e-commerce and media services. The company offers pay TV to six million households in Africa. Another holding is Companhia de Bebidas Das Americas (ABV), a beverage company that produces and distributes Pepsi, Budweiser and other brands throughout Latin America.

PowerShares Golden Dragon China has achieved strong results by following an unusual approach. The ETF only takes companies that are listed in the U.S. and derive most of their sales from China. The resulting portfolio has most of its assets in technology and telecommunications. The biggest holding in the PowerShares fund is Baidu (BIDU - Get Report), the dominant Chinese search engine.

The fund only has 9% of assets in basic materials, financials, and energy. In contrast, iShares China Large-Cap (FXI) -- the biggest China ETF with $5.1billion in assets -- has 71% of assets in basic materials, financials, and energy. The PowerShares approach has paid dividends. During the past five years, the fund returned 2.7% annually, while the iShares ETF lost 1.8% annually.

WisdomTree Emerging Markets SmallCap Dividend ranks as one of the top performers in the sector. During the past five years, the fund returned 6.1% annually, compared to 0.3% for iShares MSCI Emerging Markets. Because it only takes stocks that rank in the bottom 10% according to market capitalization, the WisdomTree fund excludes many of the giant exporters that dominate the four biggest emerging markets -- the so-call BRIC countries of Brazil, Russia, India, and China.

Instead, the small-cap fund holds sizable positions in such countries as Malaysia and Thailand. Those have strong consumer stocks that should continue growing.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
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