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AS WE WORK our way through the three dozen or so screens we conduct we do notice subtle changes over time. A fund will fall off a list or a sector will lose steam. That's just a natural function of the market moving through its cycle.

In most cases, though, we don't see things fall off a cliff like they have over the last year. Of course, the housing and financial sectors have taken a beating and rightly so. But week after week we've been surprised at the dramatic downturn in emerging-markets funds. This once red-hot category has cooled off quickly, losing 16.4% so far in 2008, or, according to Lipper, two percentage points worse than the average world equity fund.

Whenever a fund category moves through such a striking swing we feel compelled to check in and see what's going on, especially when it concerns funds that have seen billions of dollars flow into their coffers the last few years. So this week we are devoting the screen to emerging-markets funds. We started with a universe of 421 funds that cover countries in Latin America, parts of Asia, Eastern Europe and Africa and the Middle East, too. We knocked out 367 that charged loads. Once we added in our usual performance and expense criteria we were left with five equity funds.

But we wouldn't be too quick to pull the trigger on such an investment. Emerging markets are pulling back for good reasons. The soaring economic growth rates of the last few years coveted by so many investors are starting to cool off. No doubt, those rates are still higher than, say, the U.S. But smaller economies are starting to feel the pinch of inflation brought on by high gas, food and commodity prices. Corporate profits are also being squeezed. And there's a growing sentiment that the troubles the U.S. has experienced the last 12 months will slowly find their way across the globe.

Indeed, earlier this week Merrill Lynch released its latest survey of fund managers. The company found that when it came to emerging markets, only 4% of those polled were overweight the equities of these countries. That was down from 31% just two months ago. And every single manager polled yes, every one of them expects profit growth to slow over the next 12 months.

Marguerita Cheng, an Ameriprise financial advisor based in Besthesda, Md., saw all that coming late last year. For her clients that had existing emerging-markets exposure, she trimmed their positions and took some profits off the table. She didn't sell their positions outright. She still thinks it's important to have this global exposure. But she wanted to lock in gains. She suggests that if investors are still interested in building emerging-markets positions that they use dollar-cost averaging to slowly accumulate shares. It's too risky, she thinks, to plop down a large chunk of cash at this time. We think those are smart moves.

"We are still maintaining the asset class but we took gains off," she says. "We didn't want to let it run up to a point where it starts to come crashing down."

In the past we've told you about various ways to play this theme, from American depositary receipts, or ADRs, to exchange-traded funds that cover specific countries or geographical areas. One new wrinkle is so-called frontier-markets funds. Most investors associate emerging markets with countries like Brazil, Russia, China, India or South Korea. But now the spotlight has shifted to areas like Africa, the Middle East and Eastern Europe. Last week, Van Eck launched the Market Vectors Africa ETF. This fund tracks an index of 50 companies that are either domiciled on that continent or generate 50% of their revenues there. In 2007 T. Rowe Price launched its Africa & Middle East fund. In 11 months of trading it has attracted almost $1 billion in assets.

Although the number of them is dwindling, most advisors we talk to still prefer to pay up for a good international manager who travels the world, visits with management and actually sees factories and offices. T. Rowe Price Emerging Markets Stock has been investing in these countries since 1995, giving it one of the longest track records around. It charges a reasonable $120 a year for every $10,000 invested. Manager Christopher Alderson has been with the fund since its inception and during that time he has accumulated an impressive record. Over the last decade this $5 billion fund has averaged an annual return of 14.6%, according to Lipper. The fund experienced a rough patch this year it's trailing its average competitor but Morningstar analyst William Samuel Rocco wrote in his latest report on the fund that those results were "definitely an anomaly." Top holdings include America Movil and Petrobras.

The Criteria
The emerging-markets funds on our list had to be open to new money, charge an expense ratio less than 1.5% and require a minimum investment under $5,000. Their performance track records over the trailing three- and five-year time periods put them in the top 40% of the category. As usual we didn't allow load funds.

Also See:

• Funds That Won't Break Your Budget

• First Half of 2008 Yields Losers, a Few Winners

• Health-Care Funds Are Ailing in 2008

See the Fund Screen Table

Globe Trekkers
Ticker	Name	Expense Ratio (%)	Assets (In Millions)	Year-to-Date Return (%)	3-Year Average Annual Return (%)	5-Year Average Annual Return (%)
	Fidelity Emerging Markets	1.05	5,771	-17.9	27.1	29.4
	Lazard Emerging Markets Portfolio	1.48	1,952	-9.8	24.7	30.6
	T. Rowe Price Emerging Europe & Mediterranean	1.24	1,621	-11.7	24.0	34.8
	T. Rowe Price Emerging Markets Stock	1.20	5,014	-18.7	23.5	28.6
	T. Rowe Price Latin America	1.20	3,950	-5.46	41.7	43.7

Source: Lipper

Note: Data as of July 17, 2008

Emerging-Markets Screen Recipe

Fund Type = Emerging Markets *

Annualized 3-Year Return (%) = Display Only

Rank in Classification (%) (3 year performance) <= 40

Annualized 5-Year Return (%) = Display Only

Rank in Classification (%) (5 year performance) <= 40

Expense Ratio <= 1.5%

Load Fund (type) = No Load

Minimum Initial Investment <= 5,000

Open to New Investors = Yes

Total Net Assets ($ millions) >=10

Year-to-Date Return (%) = Display Only

* Screen only includes equity funds