| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.8% | 5.7% | 40.7% |
| 2025 |
|---|
| 40.7% |
Baillie Gifford's Emerging Markets fund delivered strong absolute returns in Q4 2025, capping an exceptional year with 40.69% net returns. The portfolio benefited from the continued evolution of the AI investment cycle, particularly in Korean semiconductors, commodity strength, and emerging markets' growing centrality in global economic architecture. Samsung Electronics and SK Hynix were top contributors, with both companies seeing strong demand for AI memory and fully booked capacity through 2026. China remains a key focus despite geopolitical headwinds, with the 15th Five-Year Plan emphasizing AI, semiconductors, and smart manufacturing. The commodities sector gained from US easing cycles and weaker dollar expectations, benefiting gold, lithium, and copper holdings. Portfolio activity included new positions in Emaar, Capitec, Montage Technology, and InterGlobe Aviation, while reducing exposure to outperforming AI and commodity names. Looking ahead, the manager sees emerging markets as structurally underrepresented relative to their economic contribution, with attractive valuations and diverse growth drivers supporting continued optimism despite technology valuation concerns and geopolitical uncertainties.
Emerging Markets companies are at the forefront of technologies that will shape the decades ahead, yet despite contributing more than half of the world's GDP and even more of its future growth, emerging markets still comprise little more than 10% of the MSCI All Country World Index, creating a significant opportunity for long-term growth investors.
This year has seen a strong rerating of the Emerging Market asset class as a whole; however, the discount to developed markets remains significant. The manager reinforces enthusiasm for opportunities in Emerging Markets and challenges their under-representation in global funds. Despite challenges, there are good arguments to believe the mood will stay positive for Emerging Markets with diverse growth drivers, encouraging operational performance, and attractive valuations.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 15 2026 | 2025 Q4 | 000333.SZ, 000660.KS, 005380.KS, 005930.KS, 0700.HK, 2318.HK, 2454.TW, 2939.TW, 300750.SZ, AXSB.NS, B3SA3.SA, BABA, FM.TO, IMP.JO, KMB.NS, MELI, NPN.JO, RELIANCE.NS, SE, SQM, TSM | AI, China, commodities, emerging markets, growth, semiconductors, South Korea, technology | - | China's high-level economic policy framework places significant emphasis on artificial intelligence, computing infrastructure, semiconductors, and smart manufacturing. The continued evolution of the AI investment cycle drove positive momentum, with notable strength in Korea. Memory semiconductor companies like Samsung and SK Hynix benefited from soaring demand for high-performance AI memory. Strong operational performance at Samsung Electronics and SK Hynix contributed to fund returns. Samsung is projected to regain the number one position in the global DRAM market, driven by soaring demand for high-performance AI memory and sharp rise in conventional DRAM prices. SK Hynix reported 62% year-over-year growth in profits and all capacity is fully booked for 2026. China offers the clearest example of how policy direction, innovation capacity and sheer scale can combine to reshape global industries. The 15th Five-Year Plan emphasizes AI, computing infrastructure, semiconductors, and smart manufacturing. Despite tariffs and trade tensions, the combination of high-quality businesses and compelling valuations remains hard to ignore. The commodities sector has been in focus with combination of US easing cycle and political will for a weaker dollar being very positive for gold and broader precious metals complex. Lithium saw easing upstream cost pressures and robust downstream battery-storage demand supporting sharp price recovery. Copper market shows structurally tight supply with planned supply expected to meet only 70% of projected 2035 demand. Latin American e-commerce and fintech platform MercadoLibre detracted from performance for the second quarter in a row, though the manager maintains a differentiated view based on long-term investment horizons. The company recorded its 27th straight quarter of 30% or higher revenue growth. Korean e-commerce leader Coupang faced challenges from a major data breach despite continuing strong growth. South Korea was one of the world's best-performing markets this year, buoyed by regulatory and governance reforms raising hopes for improved shareholder returns through the 'Value Up' program. Memory semiconductor space showed strong operational performance with significant upgrades to earnings forecasts, making valuations still attractive in global context despite rapid share price appreciation. |
| Oct 20 2025 | 2025 Q3 | 002050 CH, 600690 CH, A035420 KS, A086280 KS, CATL, DIDIY, EBR | Artificial Intelligence, China, Electrification, emerging markets, semiconductors |
CATL CN Samsung Electronics MercadoLibre B3 SA Hyundai Glovis |
The fund benefited from strong semiconductor and technology performance in Asia as AI demand surged across supply chains. Chinas recovery, supported by policy easing and private-sector stabilization, improved sentiment, while holdings like TSMC, Samsung, and CATL drove gains. Managers added Electrobras and FPT for exposure to electrification and digital growth in emerging economies. |
| Jul 11 2025 | 2025 Q2 | - | AI, China, emerging markets, technology | - | |
| Apr 18 2025 | 2025 Q1 | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
ChinaChina's economic rebalancing appears to be moving forward. Market liquidity, anti-involution and a measured consumer policy are likely to drive a sustained market performance in 4Q. Fiscal support and ongoing reforms in China is supportive of a stronger currency. |
Growth Policy Currency | |
CommoditiesBull market may be in early stages with most commodities 46% below nominal peaks and 73% below inflation-adjusted highs. Commodity-to-equity ratio near historic lows suggests capital starvation. Current cycle appears only one-third complete compared to historical precedent. |
Cycles Capital Valuation Equities | |
E-commerceSeveral investments in e-commerce leaders across Asia and Latin America, including MercadoLibre, Sea Limited and Alibaba, faced a more competitive operating environment during the period. As long-term investors, SGA observes that competitive intensity in these markets tends to ebb and flow over shorter time horizons, with market leaders typically emerging from such periods with strengthened strategic positions given inherent network effects. |
Marketplaces Competition Network Effects Asia Latin America | |
SemiconductorsRGA initiated a position in Lattice Semiconductor, viewing it as an under-appreciated AI winner with immediate gains and longer-term optionality. Lattice's focus on efficiency and advantages in low-power, small footprint FPGAs position it favorably for AI servers, particularly as the only Post-Quantum Cryptography secure chips on the market. |
FPGAs Security Efficiency AI Infrastructure Programmable | |
South KoreaKorea has been a fast follower in shareholder rights enhancements, with government legislation and most companies now having value-up plans. The KOSPI Index gained 79% in 2025, though the market still trades at less than 11x forward earnings, suggesting the Korean discount remains. |
South Korea KOSPI Value-up Korean Discount | |
| 2025 Q3 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
ChinaChina's economic rebalancing appears to be moving forward. Market liquidity, anti-involution and a measured consumer policy are likely to drive a sustained market performance in 4Q. Fiscal support and ongoing reforms in China is supportive of a stronger currency. |
Growth Policy Currency | |
EnergyBHE operates regulated utilities serving 5.4 million customers and natural gas pipelines. The business faces significant investment needs driven by AI computing demand and wildfire risk mitigation, particularly in the Western U.S. |
Regulated Utilities Natural Gas Renewable Energy Grid Infrastructure | |
| 2025 Q2 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
Emerging marketsGlobal equities, especially those outside the U.S., powered equity returns. In emerging markets, shares of companies linked to commodities were the strongest performers as commodities rallied. Even after a strong year for international and emerging markets shares, we still see some of the best value in the world in these areas. |
International Commodities Non-US Best Value |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 20, 2025 | Fund Letters | Alex Summers | CATL CN | Contemporary Amperex Technology Co. Limited | Other | Electrical Equipment | Bull | Shenzhen Stock Exchange | Batteries, dividends, energy storage, EV, Margins, market share, profitability | Login |
| Oct 20, 2025 | Fund Letters | Alex Summers | Hyundai Glovis | 086280 KS | Industrials | Logistics | Bull | NYSE | automotive, Exports, growth, Hyundai, Integration, Logistics | Login |
| Oct 20, 2025 | Fund Letters | Alex Summers | Samsung Electronics | 005930 KS | Information Technology | Semiconductors | Bull | NYSE | AI, Contracts, Foundry, growth, Memory, semiconductors, Tesla | Login |
| Oct 20, 2025 | Fund Letters | Alex Summers | MercadoLibre | MELI | Consumer Discretionary | Internet & Direct Marketing Retail | Bull | NASDAQ | Argentina, Brazil, e-commerce, Fintech, GMV, growth, Margins | Login |
| Oct 20, 2025 | Fund Letters | Alex Summers | B3 SA | B3SA3 BZ | Financials | Financial Data & Stock Exchanges | Bull | Brasil Bolsa Balcão | Brazil, diversification, Exchange, growth, Interest rates, Volumes | Login |
| TICKER | COMMENTARY |
|---|---|
| 000660.KS | SK Hynix has solidified its leadership in high-bandwidth memory (HBM), emerging as the exclusive HBM supplier for Microsoft's in-house AI accelerator and securing roughly two-thirds of NVIDIA's anticipated HBM4 demand for its next-generation platforms at meaningfully higher price points and margins than prior generations. |
| 005380.KS | We increased exposure to Hyundai Motor, which is navigating the industry's transition to electrification with a focus on profitability and capital efficiency. Its strong mass-market franchise and growing premium brand, Genesis, has taken market share in key segments via attractive product launches. Strategically, the company is prioritising hybrids over pure battery electric vehicles, aligning with consumer preferences. In the critical North American market, hybrids make up ~12% of units but have grown share consistently as EV demand has stalled. Hyundai plans to make hybrid drivetrains available across most of its models over the coming two years, which should enable the company to meet this wave of consumer adoption and improve on its market share gains of recent years. A forward earnings multiple of 6x is an attractive valuation for a market share gainer. |
| 005930.KS | Top gainers included Samsung (+38% in U.S. dollar terms) |
| 0700.HK | Shinya also visited Shenzhen, where Star Magnolia Capital organized an educational visit for our families to Tencent's headquarters, alongside meetings with several promising early-stage companies. |
| 2318.HK | Top gainers included Ping An Insurance (+23%) |
| 2454.TW | MediaTek is Taiwan's leading chip designer, forming a duopoly in the smartphone market with Qualcomm. Stable pricing and cash generation support the business, while artificial intelligence growth potential through its partnership with Google is underappreciated by the market. |
| 300750.SZ | CATL alone commands 38% market share in global lithium-ion battery production |
| BABA | Alibaba was a detractor during the quarter after the company reported mixed fiscal Q2 results. While cloud revenue growth accelerated and margins remained stable, the core commerce business struggled with slowing growth and significant profit pressure, particularly in the quick commerce segment where heavy investment and intense competition led to a sharp decline in profitability. |
| IMP.JO | Impala (+28bps absolute and relative) |
| MELI | E-commerce Volatility: turbulence in our e-commerce portfolio companies, Sea Ltd (Southeast Asia) and MercadoLibre (Latin America), amidst aggressive price wars. |
| NPN.JO | Naspers performed strongly during the year, gaining alongside their holding in Tencent, which in addition to reporting robust results has benefitted from improved sentiment towards Chinese stocks, as well as an improving outlook for its eCommerce portfolio, which continues to perform strongly. The company continues to execute on its value-accretive open-ended buyback program at both Prosus and Naspers. |
| RELIANCE.NS | India-based conglomerate: chemicals, refining, #1 mobile telco and #1 retailer in India |
| SE | During the quarter, we initiated a new position in Sea Limited, a Southeast Asian consumer internet company with an integrated ecosystem combining e-commerce, digital payments, and entertainment. Sea has a diversified business model, with its Shopee e-commerce platform, a mobile-centric marketplace that provides integrated payments, logistics infrastructure, and seller services. |
| SQM | SQM is a Chilean chemical and mining company with extraction rights in the Salar de Atacama, which is the world's largest and lowest-cost lithium deposit. Its share price has been strong amid rising market expectations for electromobility and energy storage systems demand, which supports price recovery and volume growth. SQM achieved record lithium sales volumes in the third quarter, up 43% year-over-year, and achieved approval from China's antitrust regulator for a joint venture that will enable long-term lithium production planning in Chile through 2060. |
| TSM | TSMC was a top contributor during the quarter, driven by robust demand for advanced semiconductor manufacturing and improved gross margins as AI continues to grow strong and the non-AI segment showed signs of recovery. Management raised its revenue growth guidance to the mid-30% range, and given continued strength in demand, AI-related growth targets are expected to move above the current mid-40% level. |
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