The performance of diversified emerging market equity funds

• Diversified emerging market funds do not outperform the market benchmark index.
• The systematic risk of most emerging market funds is similar to that of the market.
• Emerging market funds do not show any evidence of market timing ability.
• Persistence in performance is driven mainly by poorly performing funds.

We investigate the performance of globally diversified emerging market equity funds during the first decade of the twenty-first century. A vast majority of these funds do not outperform the market benchmark even before transaction costs. The systematic risk of most of the funds is similar to that of the market benchmark portfolio, which may suggest that they aim to offer diversification benefits rather than seeking superior risk-adjusted returns through active management. We do not find any evidence of market timing ability amongst these funds. Finally, whilst we detect persistence in performance, this result is driven mainly by the poorly performing funds.