Emerging market stocks have faced considerable headwinds over the past few years. The global economic slowdown has been tough on developed nations and their established economies, but the global slowdown has been even more devastating for emerging markets. Investors seeking emerging market exposure should tread lightly and stick with more actively managed funds such as the Oppenheimer Developing Markets A (ODMAX).

Fund Overview

The Oppenheimer Developing Markets A mutual fund began trading on November 18, 1996, and it tries to generate performance and returns through a portfolio of diversified emerging market stocks. As of June 2016, the mutual fund charges an expense ratio of 1.3%, offers a yield of 0.46%, and it is rated four stars and awarded a silver medal by Morningstar Investment Research. In addition, the Oppenheimer Developing Markets A fund is an A-share mutual fund that charges a front-load expense of 5.75%.

Justin Leverenz, CFA, is the most senior manager at the Oppenheimer fund, and John Lech is a relatively new fund manager who joined the fund in September 2015.


The fund has returned -5.52% over the past three years; -2.27% over the past five years; 4.27% over the past 10 years; and 10.64% over the past 15 years. Since its inception, the fund has returned 11.11%. Turning to historical volatility, the Oppenheimer Developing Markets A fund has a three-year standard deviation of 14.91, a five-year standard deviation of 16.88, a 10-year standard deviation of 22.31, and a 15-year standard deviation of 21.67.

Portfolio Allocation Summary

Turning to the portfolio’s asset allocation, 92.80% of the fund is held in non-US. stocks; 5.08% in cash; 1.31% in other; and 0.82% in US. stocks. Giant-cap stocks make up the majority of the equity allocation with 53.06%, followed by large-cap stocks with 40.73%, medium-cap stocks with 4.9%, and small-caps with 1.3% of the portfolio. The top three sectors by portfolio weight are consumer cyclicals with 25.07%, financial services with 20.21% and technology with 19.57% of the portfolio.

As of January 2015, the top five country allocations within the portfolio are: China with 24.5%, India with 16.9%, Hong Kong with 8.2%, Russia with 7.7%, Brazil with 6.3%, and Mexico with 6% of the overall portfolio.

Top 5 Holdings

As of March 2016, the Oppenheimer Developing Markets A fund holds 94 positions within its portfolio and has an annual turnover of 36%. As of January 2016, the mutual fund's top three holdings are: Tencent Holdings Ltd.(HKSE: 0700.HK) with 5.2%, Housing Development Finance Corp Ltd. with 4.5%, Alibaba Group Holding Limited (NYSE: BABA) with 3.9% of the portfolio.

Overall, emerging markets have struggled considerably after strong gains in the years prior to the Great Recession. Since 2008, emerging markets have struggled to regain their footing, as overall global economic conditions have slowed, commodity prices have tumbled and global companies are beginning to cut emerging market exposure. While emerging markets have fallen out of favor with investors, the long-term investor can choose to gain allocation in emerging companies while valuations are low and companies are undesirable.

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