The chart below indicates that the overwhelming majority of actively managed emerging-market equity funds are outperformed by the MSCI emerging-markets index. Even though emerging markets are not likely to be as efficient as developed markets, they are costly to access and to trade. Expense ratios of active funds are far higher than is the case in developed markets. Moreover, liquidity is lower and trading costs are higher in emerging markets. Therefore, after all expenses are accounted for, indexing turns out to be an excellent investment strategy.
