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A Heat-Seeking Emerging Markets Fund That Laps Its Rivals

An employee works in the refrigerated warehouse in Chok Chai, Nakhon Ratchasima province, Thailand. Photograph by0xA0Dario Pignatelli/Bloomberg
An employee works in the refrigerated warehouse in Chok Chai, Nakhon Ratchasima province, Thailand. Photograph by0xA0Dario Pignatelli/Bloomberg

It’s been a challenging year for emerging markets. The hugely popular Vanguard FTSE Emerging Markets ETF (VWO ) is down about 1 percent so far in 2013; the iShares MSCI Emerging Markets Index (EEM ) has fallen 2.1 percent. Bucking the trend is the PowerShares DWA Emerging Markets Technical Leaders Portfolio (PIE ). That ETF is up 14.6 percent during the same period. How is that possible?

?? It all comes down to the design of the index that PIE tracks -- the Dorsey Wright Emerging Markets Technical Leaders Index, developed by technical analysis pioneer Tom Dorsey’s firm.