Having long-lagged developed markets, emerging markets staged a stunning turnaround in 2025. The asset class has also delivered a robust performance year-to-date too.
In this article, we ask whether the set-up for emerging markets remains compelling for the balance of 2026. We also highlight six actively-managed funds and investment trusts giving investors access to the asset class.
Why invest in EMs now?
Global investors remain structurally underweight emerging markets. Combined with improving fundamentals and a softer dollar, this suggests now is a good time to buy into the asset class.
Emerging markets are key to the artificial intelligence (AI) buildout from industrial metals to manufacturing supply chains. Copper and other critical industrial metals essential to AI infrastructure are mainly sourced from emerging economies.
In addition, valuations across emerging market equities remain at big discounts to developed markets.
The world’s biggest asset manager, BlackRock, is positive on emerging markets going into 2026. It sees AI capital expenditure, supply chain shifts and commodity dynamics continuing to drive the asset class.
Coombs is constructive
Also constructive is Mark Coombs, the CEO of Ashmore (ASHM). The emerging markets-focused fund manager benefited from net inflows and continued investment outperformance in the half to December 2025.
‘It is clear investors are acting upon the attractive risk/reward opportunities available across emerging markets and are benefiting from the continued performance of these markets,’ enthuses Coombs.
Coombs says the near-term outlook in emerging markets is for higher economic growth, some deflationary pressure allowing for easier monetary conditions, and further weakness in the value of the US dollar.
These are the themes that have driven recent emerging markets outperformance.
Compelling value
Darius McDermott, managing director at FundCalibre, argues emerging markets ‘still look compelling value in 2026’.
He observes: ‘The MSCI Emerging Markets index trades on a forward P/E of 13.5 times versus 20 times for the MSCI World, with a price-to-book ratio around half.
‘Yet the growth outlook is materially stronger, with the IMF forecasting 4.2% GDP growth for emerging markets in 2026, compared with 1.8% for developed economies.’
McDermott continues: ‘A weakening US dollar could provide a tailwind for exports and capital flows, while favourable demographics support a long runway for growth.’
The funds guru continues: ‘India may re-emerge as a key focus after a weaker 2025. And China remains central as it accelerates its push towards technological self-sufficiency.’
Tariffs and a potential unwind in parts of the AI trade pose risks. Yet McDermott says they look modest relative to the ‘structural vulnerabilities facing developed markets.
Elevated debt levels across the US, UK and parts of Europe leave policymakers increasingly constrained by bond markets.’
Year of the Fire Horse
Chetan Sehgal, manager of Templeton Emerging Markets (TEM), tells Sharesify the set-up is perhaps less compelling than it was six months back because there’s been a big rally.
However, ‘EM stocks do still offer more value than developed markets, but we still have to see how things shape up politically.
‘We are entering the Chinese New Year of the Fire Horse. And China is still cheap in many areas. Other EMs are cheap but maybe they don’t have that kind of growth.’
Abbas Barkhordar, manager of Schroder AsiaPacific Fund (SDP), also notes the Chinese market was a strong 2025 performer.
Yet much of the performance was more a result of a re-rating in multiples than higher expected earnings.
‘For the positive performance to continue, earnings growth will need to be a bigger driver, which likely requires greater policy support as well as a more stable external environment,’ cautions Barkhordar.
Tom Kynge is multi-asset portfolio manager at Sarasin & Partners. He sees opportunities in markets with strong sector exposure and improving policy backdrops.
‘South Korea and Taiwan stand out given their significant exposure to semiconductors, particularly areas tied to the AI cycle,’ he argues.
‘In Latin America, political change in countries such as Argentina is beginning to improve the long-term economic outlook, while the region’s exposure to materials and metals also benefits from stronger global demand.’
6 funds for far-flung markets
FundCalibre’s McDermott says emerging markets are ‘diverse, fast-evolving, and often inefficiently priced’. This means ‘the most effective way to access them is typically through skilled active managers’.
He points out passive exposure can be ‘a blunt instrument in emerging markets, as indices are inherently backward-looking.’
McDermott notes China, Taiwan and India have come to dominate benchmark allocations. And this concentration could become even more pronounced if South Korea is upgraded to developed market status.
He reckons a renewed commodity upswing ‘could favour resource-heavy economies such as parts of Latin America, which barely register in the index.’
‘Rather than making high-conviction country calls, we favour diversified, actively managed emerging market funds such as FSSA Global Emerging Markets Focus (BZ8GV67) and JPMorgan Emerging Markets Growth & Income (JMGI).
Emerging market debt also remains attractive, with average debt-to-GDP around 75% versus 110% for advanced economies. Here, we favour strategies such as M&G Emerging Markets Bond (B7GNKY5) and BlueBay Emerging Market Unconstrained Bond (BMBWXR6).’
Two investment trusts Sharesify believes are worth considering are:
Templeton Emerging Markets (TEM)
| Share price: 268p | Discount: 8.3% |
| NAV/share: 292p | Total assets: £2.9bn |
An 8.3% discount to net asset value (NAV) presents a buying opportunity at the best 10-year share price total return performer in the AIC Global Emerging Markets sector. Templeton Emerging Markets has delivered 345% versus the sector average 260%.
Managers Chetan Sehgal and Andrew Ness follow a quality growth approach and roughly 80% of the FTSE 250 trust’s assets are allocated to Asia followed by Latin America at over 12%.
Top 10 holdings include contract microchip maker TSMC, Korean memory chipmaker SK Hynix, and Chinese tech titans Alibaba and Tencent.
Diversified across almost 90 holdings, the trust also offers exposure to the commodities theme via Brazilian copper and iron ore miner Vale.
Templeton Emerging Markets also holds India’s ICICI Bank. It also participated in the recent IPO of Indian fintech Pine Labs, a point of sale systems provider that is one of the largest gift card issuers on Amazon.
Fidelity Emerging Markets (FEML)
| Share price: £12.36 | Discount to NAV: 6.5% |
| NAV/share: £13.22 | Total assets: £930m |
Also trading at a discount is Fidelity Emerging Markets (FEML). The AIC Global Emerging Markets sector’s top one-year share price total return performer offers a distinct route into emerging market shares.
FEML’s performance has proved particularly strong during the last 12 months thanks to the rally in emerging markets and the outperformance of the MSCI Emerging Markets Index. Yet there is still scope for the discount to narrow further if sentiment improves.
Managers Nick Price and Chris Tennant invest in emerging and select frontier markets to achieve long-term capital growth. They maintain broad diversification by geography and sector.
A key differentiator is the fund’s use of short positions held alongside its long book. The short positions are a mix of one-off shorts and pair trades, where a short is matched with a long in a related company.
Top holdings span TSMC and South African internet company Naspers. Leading ‘overweights’ include Pan African Resources and Chinese grid equipment supplier Sieyuan Electric.
Ongoing charges of 0.83% are competitive and Fidelity Emerging Markets does not charge a performance fee.
AIC Global EM Sector – 10 year share price total return (%)
| Trust | Return (%) | Discount to NAV (%) |
| Templeton Emerging Markets | 345 | 8.3 |
| JPMorgan EM Dividend Income | 258 | 6.0 |
| JPMorgan EM Growth & Income | 248 | 9.0 |
| Fidelity Emerging Markets | 244 | 6.5 |
| Barings Emerging Markets | 204 | 7.2 |
Source: The AIC, Morningstar
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