Emerging markets are known to be highly volatile. Nonetheless, many international or global funds are too highly concentrated in emerging markets, a fact that came to light in the past week when markets in Brazil, Russia and India tumbled--and many international funds fell right along with them, The Wall Street Journal reports.
And as investors have seen their funds decline, they're pulling their money out of what has been a red-hot sector for a number of years. In the week that ended Wednesday, international funds suffered net outflows of $1.9 billion, according to AMG Data Services.
The average international fund holds 10% in emerging markets, but many funds hold 20% or even 40% in emerging markets, Morningstar data shows. International funds' overexposure to emerging markets is further proven by the fact that these stocks are down 6% year to date--and international funds are down 5%.
Financial advisers recommend that investors heed their funds' quarterly reports, to find out just how large their international fund's exposure to emerging markets is.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.