With the slowdown in China, and global demand for commodities weak, the emerging markets have struggled. For the year ending October 31, the MSCI Emerging Markets Index lost more than 14% in U.S. dollar terms. While the recent past is dismal, the medium to long term outlook is more positive. Valuation levels are significantly below historic averages. According to Brandes Investment Partners, the MSCI EM Index was trading at a 24% discount to the historic average, 30% to developed markets, and 35% lower than the S&P 500, based on the P/E ratio. Numbers were similar when comparing P/B and P/CF. This indicates that there is some upside to emerging markets equities. Unfortunately, with the uncertainty hovering over China and commodities, we may see more volatility and downside before things turn around, and the timing of any turnaround is unknown. I am avoiding direct exposure until we get a bit more clarity. Still, I believe this is the best option for passive emerging market exposure.