Is There Any Alpha in Institutional Emerging Market Equity Funds?

Posted: 22 Nov 2011 Last revised: 26 Jul 2012

See all articles by Wenling Lin

Wenling Lin

Office of Comptroller of Currency

Date Written: November 21, 2011


Can active fund managers outperform the passive index in global emerging-markets equity arena? To answer this question, this paper delineates emerging market fund strategies and applies the multifactor and conditional CAPM approaches to a unique data set consisting of institutional emerging market managers returns from Russell Investments. This analysis results in five major findings: (1) varieties of products have proliferated in this asset class; (2) active management works in this asset class, but investors have relied more on research to hire the good ones; (3) value managers tend to have higher alphas, but the supply of value managers is less than that of growth or market-oriented managers; (4) key risk drivers are price momentum, valuation, Asia, and resources sector; (5) active risks from this asset class are still present, so it’s important to diversify across multiple strategies and styles to mitigate unwanted risks. In sum, alphas are obtainable, but they are not free.

Keywords: Active management, alpha, investment styles, risk adjusted returns, emerging market equity, emerging market fund managers, price momentum, small-cap effects

JEL Classification: G20, G23, G11

Suggested Citation

Lin, Wenling, Is There Any Alpha in Institutional Emerging Market Equity Funds? (November 21, 2011). Available at SSRN: or

Wenling Lin (Contact Author)

Office of Comptroller of Currency ( email )

400 7th Street SW
Washington, DC 20219
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics