Although most emerging market funds took a beating in 1998, a few escaped with solid performances. The key to their success appears to have been their avoidance of the most troubled emerging markets in Latin America and Asia.

The emerging market equity fund sector fell 26.3 percent, according to CDA/Wiesenberger.

But, the best performing fund in the sector was the MFR Emerging Markets Total Return Fund which posted a positive 10.21 percent total return, according to Lipper.

The key to the fund's sturdy performance was staying away from investments in Asian companies, said Bruce Jensen, MFR portfolio manager. MFR's top down approach leads it to first identify appealing global markets based on the strengths of individual economies, then to identify sectors poised for growth.

Last year, MFR held an approximately 15 percent position in Greece, whose stock market based on local currency grew some 80 percent for the year, said Jensen.

Another significant 10 percent holding was in Portugal, which has prospered over the last two to three years while interest and inflation rates have declined, said Jensen. Smaller portions of the MRF portfolio were divided among Mexico, Brazil and Argentina.

Another top performing emerging market fund in 1998 was the Calvert New Africa Fund. The fund, whose sub-adviser is New Africa Advisors, can invest in the more than 500 separate countries of Africa.

Even though the fund had a negative total return of -11.64 percent in 1998, it did better than most in its sector, according to Lipper. The fund benefitted from focusing on the emerging markets of Africa.

"Africa is at a stage where Asia was 10 years ago," said Kote Nikoi, an analyst with New Africa's Durham, N.C. office.

The secret to the success of Calvert's Africa fund is the sub-adviser's local presence, said Oliver Kramer, head of marketing for New Africa. New Africa advisors has offices in Kenya and Ghana and its headquarters are in Johannesburg, South Africa.

"We're out there counting dump trucks of the companies we're investing in," said Nikoi.

This Calvert emerging market fund's investment managers also take a top down approach to investing, first determining which African countries look promising. Last year's top picks were Ghana, Kenya and the Ivory Coast.

Because there are fewer foreign investors in Africa than in Asia and Latin America, Africa did not suffer the dramatic inflows and outflows that hurt the other continents, said Nikoi.

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