Hedge fund managers tell The Wall Street Journal that the $26 billion that investors have placed in emerging markets funds, $15 billion of that through exchange-traded funds, is creating artificial valuations that could readily lead to a bubble.

Echoing those concerns is Gus Sauter, Vanguard’s chief investment officer, who pointed out that the indexes in Brazil and Peru are both up 100% so far this year. “Obviously,” Sauter said, “it’s the last trade that determines the price of everything, and there have been large flows [into emerging markets], perhaps leading to a bit of a bubble [with] pricing dislocated from reality.”

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