In its annual grading of emerging markets, Calpers offered a passing grade to Malaysia, further pounding home a point that the Asian markets are on the mend.

In its second year of considering non-financial factors such as government stability and freedom of the media, Calpers gave failing marks to, among others, Peru, Turkey and Argentina.

Calpers uses the ratings, in its own words, "to establish a framework for evaluating individual non-U.S. public stock markets to assess their ability to support institutional investment." In essence, though, Calpers uses the numbers as a guide to how it will invest in the foreign markets.

By giving 50% credence to "country factors," such as political stability and labor practices and 50% weight to "market factors" like liquidity and regulation, Calpers, or the California Public Employees’ Retirement System, said the threshold to "pass" the test this year was 2.0.

In the past, that number was set at 1.5, but Calpers’ report’s authoring firm, Wilshire Consulting, said, "This year the line being drawn at 1.5 would include all, but two countries, underscoring the improvement in countries’ development."

Malaysia did not made the cut last year, while Peru and Turkey did. Other passing countries included Mexico, South Africa, Taiwan, Brazil and Chile and Poland, which received a perfect score.

As of today’s standards, an emerging market is any country with a per capita gross national income of $9,076, termed "low- and middle-income economies."

Subscribe Now

Access to premium content including in-depth coverage of mutual funds, hedge funds, 401(K)s, 529 plans, and more.

3-Week Free Trial

Insight and analysis into the management, marketing, operations and technology of the asset management industry.