Many companies featured on Money advertise with us. Opinions are our own, but compensation and
in-depth research may determine where and how companies appear. Learn more about how we make money.

Every month Merrill Lynch (or Bank of America Securities-Merrill Lynch for you scorekeepers) checks in with a bunch of big time money managers to take their bullish/bearish temperature. Collectively the 400 or so global managers in the May survey are pushing the buttons controlling portfolios worth nearly $1 trillion, so we’re not talking about a Beardstown lady survey here.

And these pros are getting their bull on. Seventy percent said they believe the world economy will improve over the next 12 months and so they are upping their equity stakes. The area getting the most attention: emerging markets. The report notes that 46% of the money managers are now overweight the emerging markets, compared to 26% back in April. The bullishness for China specifically is at its highest since the survey began tracking Chinese sentiment in 2003.

Maybe it’s just coincidence, but um, it just so happens that the MSCI emerging markets index has shot up 15% in the past month, and has gained nearly 50% over the past three months. A bit of performance chasing perhaps? To be sure, emerging markets got hammered mercilessly in ’08 (the iShares Emerging Market ETF lost nearly 50%) so there is a decent valuation gambit at play, but even the co-head of Merrill’s international investment team expressed some concern at the surge in emerging markets interest. “….this rush to take on risk, especially in emerging markets is reminiscent of bubble-like behavior,” said Michael Hartnett.

Individual investors might be wise to pause and consider the bubble possibility before investing at today’s levels. The fact is, fund investors have an absolutely horrid record chasing emerging market performance. According to Morningstar, the iShares MSCI Emerging Markets ETF has an impressive 11.7% annualized gain over the past five years through April. That’s the fund. But investor returns-that is the dollar-weighted returns that measure what the typical investor actually earned based on when they invested-is an anemic 0.96%. Poor timing resulted in earning nearly 10 percentage points less than the actual ETF returned. You might want to keep that in mind before joining the pros piling into emerging markets funds after this big run-up.

-- Carla Fried