Introduction
As a finance expert, I often get asked about the best ways to invest in emerging markets. One option that stands out is American Century Emerging Markets Mutual Funds. These funds provide exposure to high-growth economies like China, India, Brazil, and others, offering diversification beyond US stocks.
Table of Contents
What Are Emerging Markets?
Emerging markets (EM) are countries with rapidly growing economies but lower income levels than developed nations. They offer higher growth potential but come with increased volatility. The MSCI Emerging Markets Index is a common benchmark, covering stocks from countries like:
- China
- Taiwan
- South Korea
- India
- Brazil
Investing in these markets can be tricky due to political instability, currency risks, and regulatory challenges. That’s where American Century’s EM mutual funds come in—they provide professional management to navigate these complexities.
American Century’s Approach to Emerging Markets
American Century Investments, a US-based asset manager, offers several EM-focused mutual funds. Their strategy combines:
- Active Management – Unlike passive index funds, their managers pick stocks based on research.
- Growth-Oriented Investing – They focus on companies with strong earnings potential.
- Risk Management – They mitigate risks through diversification and hedging.
Key American Century Emerging Market Funds
| Fund Name | Ticker | Expense Ratio | 5-Yr Avg Return | Top Holdings |
|---|---|---|---|---|
| American Century Emerging Markets Fund | AEMGX | 1.45% | 6.8% | Tencent, Alibaba, TSMC |
| American Century Emerging Markets Value Fund | AEVLX | 1.50% | 5.2% | Samsung, Reliance Industries |
| American Century Sustainable Emerging Markets Equity Fund | AEEIX | 1.30% | 7.1% | Infosys, MercadoLibre |
Data as of latest filings (2024). Past performance does not guarantee future results.
Performance Analysis
To assess whether these funds are worth it, I compared them to their benchmark, the MSCI Emerging Markets Index, and a popular passive alternative, the iShares MSCI Emerging Markets ETF (EEM).
| Fund/ETF | Expense Ratio | 5-Yr Return | 10-Yr Return |
|---|---|---|---|
| AEMGX | 1.45% | 6.8% | 8.2% |
| EEM (ETF) | 0.68% | 5.9% | 7.5% |
| MSCI EM Index | – | 6.1% | 7.8% |
Observations:
- AEMGX outperformed the index and ETF over 5 and 10 years.
- However, the higher expense ratio (1.45%) eats into returns compared to passive funds.
Calculating Net Returns After Fees
Let’s say you invest $10,000 in AEMGX vs. EEM over 10 years, assuming both grow at 8% annually before fees:
- AEMGX Net Growth:
EEM Net Growth:
FV = 10,000 \times (1 + (0.08 - 0.0068))^{10} = 10,000 \times 1.0732^{10} \approx \$20,150Conclusion: Despite AEMGX’s outperformance, the higher fees reduce net gains compared to EEM.
Risks of Investing in Emerging Markets
- Currency Risk – If the US dollar strengthens, foreign returns shrink when converted back.
- Political Instability – Changes in government policies can hurt investments.
- Liquidity Risk – Some EM stocks trade thinly, making exits difficult.
Mitigation Strategies in American Century Funds
- Currency Hedging – Some funds hedge dollar exposure.
- Diversification – They spread investments across sectors and countries.
- Fundamental Analysis – They avoid overvalued or risky stocks.
Who Should Invest?
These funds suit:
- Long-term investors willing to tolerate volatility.
- Those seeking diversification beyond US stocks.
- Investors who trust active management over passive indexing.
However, if you prefer lower fees, a passive ETF like EEM or VWO might be better.
Final Thoughts
American Century’s EM funds offer strong active management but come with higher fees. If you believe their stock-picking can consistently beat the index, they may be worth it. Otherwise, low-cost ETFs provide a simpler alternative.
