Emerging Markets Tempt Investors Risks and Rewards Can Be Considerable for Developing-Country Mutual Funds Series: YOUR MONEY

Article excerpt

DESPITE a stormy period, emerging-market mutual funds continue to sprout like spring flowers.

Last month, both T. Rowe Price, in Baltimore, Md., and the Calvert Group, in Bethesda, Md., offered funds invested in emerging markets -- that is, in stocks from developing nations or nations with rudimentary stock markets.

T. Rowe Price rolled out its new "T. Rowe Price Emerging Markets Stock Fund," which will invest in large and small companies in Asia, Europe, Latin America and Africa. Calvert Group announced its "Calvert New Africa Fund," designed to seek out investment opportunities in the 55 nations of Africa.

"We see this as an excellent period for people wanting to invest in emerging markets," says Steve Schueth, executive vice president of Calvert Group. "The new fund also provides investors with the opportunity to be involved in {the} empowerment" of the people of Africa, particularly South Africa, Mr. Schueth says.

The African fund so far has only about $250,000 in assets, all invested in companies in South Africa and Ghana, according to Justin Beckett, president of the fund. As its assets build, the fund will invest in companies throughout Africa, says Mr. Beckett.

The new T. Rowe Price fund has drawn in slightly under $4 million in assets. It has already put money into overseas equities, particularly in Asia and Latin America. In April, the fund posted a return of 4.6 percent, notes spokesman Steven Norwitz.

Highly profitable

For investors with a bit of fearless grit, investing in emerging-market funds can be highly profitable over time.

By comparison, in the United States, the total compounded average annual return for Standard & Poor's 500 index over the 10 years ending Dec. 31, 1994 was 14.34 percent.

It can also be highly risky. Political instability, currency fluctuations, high inflation, and limited regulatory oversight at times have affected fund shares invested in developing nations. Many investment advisers say average investors should not put more than 5 to 10 percent of their total financial portfolio in international stocks in general -- a percentage that could include some emerging-market issues.

Still, in 1993 alone, US investors poured $4.5 billion into emerging-market funds. Returns in some cases were spectacular, hurtling into double digit ranges. Many of those same investors were badly burned in 1994, as a number of overseas markets tumbled downward or gyrated wildly, dragging fund portfolios with them. …


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