Emerging Markets Still Show Promise

Don't get used to those juicy emerging market returns. But that doesn't mean you should get out of funds in that space.

The incredible performance of emerging-market stocks is well known by now: The iShares MSCI Emerging Markets Index(EEM Quote) has returned a spectacular average of 25.5% annually over the past three years thanks to the economic ascendancy of countries like Brazil, Russia, India and China.

David Lazenby, portfolio manager of the $560 million Legg Mason Emerging Markets(LMEMX Quote) fund believes the outsized gains may be over, but there are still solid returns to be had in so-called less-developed countries, primarily due to improved fundamentals.

Lazenby's fund has crushed its benchmarks, returning an average of 32% per year over the past three years and 40% over the last five. ...