Are emerging markets beaten down sufficiently to become great value? I did not think so, mainly because the economic slump is still deepening and spreading. It is likely still the case that developing economies catch pneumonia when advanced economies sneeze. Since the latter themselves now have full-blown pneumonia, emerging markets as a whole are going to be floored.

That was my take, but now there is evidence that the big money is moving back to emerging markets. It comes from the research and trading arm of State Street, the institutional money manager and service provider, which analyzes the buying and selling patterns of institutional investors to gauge their willingness to take risk.

This measure of investor confidence has recovered from its low in late 2008, driven largely by American institutions investing in EM.

Ken Froot, the Harvard professor who helped develop the State Street investor confidence index, says that “institutional investors have been willing to add exposure across a number of the peripheral and emerging markets from which they had divested towards the end of last year,” while “flows across developed markets remain somewhat tepid.”

Some peripheral markets, Africa in particular, are not closely linked to the global economy and may be relatively immune to the bad bug going around. Leaving aside the economic fundamentals, just the big money buying the securities will give a boost to prices—assuming this is an ongoing trend.

But it’s tough for a mutual fund investor to get into such markets. Indexes include countries where government policy often destroys economic potential and even if some developing economies do well, EM index funds are too risky at this stage.

That leaves actively managed EM funds, which can choose better positioned economies to invest in. But they are more expensive and most performed terribly in 2008. One has to look hard to pick one.

Chidem Kurdas maintains the blog MutualFundSmarts.com, an informative outlet for sophisticated mutual fund investors; and the blog Manhattan Capital (www.JenniferKerfuffle.com), a hilarious, libertarian news-spoof. Chidem is also a contributor to ThinkMarkets.