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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Sands Capital Emerging Markets Growth Fund. This analysis is provided for institutional research purposes only and is not investment advice.
"Emerging Markets Growth underperformed in Q3 2025 due to reversals in strong first-half performers and country positioning effects. The portfolio added semiconductor exposure through Samsung Electronics and SK hynix while maintaining conviction in AI infrastructure, fintech growth, and China's innovation transition."
Emerging Markets Growth delivered 5.0% net returns in Q3 2025, underperforming the MSCI Emerging Markets Index by 5.6%. The underperformance was primarily attributable to July, the worst relative month since 2022, driven by reversals among strong first-half performers, country positioning effects, and strength in select unowned businesses. Taiwan Semiconductor, Tencent, and Contemporary Amperex Technology were top contributors, benefiting from AI infrastructure buildout and strong execution. MercadoLibre, Dino Polska, and Globant were primary detractors. The portfolio completed purchases of Bharti Airtel, COSMAX, Samsung Electronics, and SK hynix to narrow underweights to South Korea and Taiwan while adding AI infrastructure exposure. Sales included Haidilao and Reliance Industries. China's innovation economy is transitioning from potential to progress with clearer policy signals and reduced competitive pressures. The portfolio maintains conviction in secular growth drivers including financial penetration, industry formalization, and AI acceleration creating winner-takes-most dynamics. Despite near-term volatility expectations, the diversified portfolio offers improved earnings visibility and trades at historically attractive valuations relative to the benchmark.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High conviction evidenced by concentrated portfolio of 43 businesses with top ten holdings representing 49.6% of assets. Manager provides specific position sizing, names largest holdings, and explains detailed rationale for purchases and sales. Clear thesis articulation for individual positions with specific growth targets and timeframes demonstrates strong conviction in selected businesses.
Growth Outlook
The manager expresses cautious optimism about emerging markets, noting they are on track for their best year since 2017 and have reminded investors of their potential. However, this is tempered by expectations of volatility in the remainder of 2025 due to AI, geopolitical, and economic developments.
Risk Appetite
The portfolio shows selective risk-taking through new semiconductor purchases to narrow geographic underweights, but maintains a measured approach. The manager emphasizes diversification across end markets, geographies, and growth stages rather than aggressive deployment.
Capital Deployment
Moderate deployment activity through completion of four new purchases (Bharti Airtel, COSMAX, Samsung Electronics, SK hynix) and two sales (Haidilao, Reliance Industries). This represents selective capital rotation rather than aggressive deployment, with no indication of significant cash level changes or scaling of existing positions.
Forward Guidance
The manager expects periods of volatility ahead and takes a cautious stance on deployment. While committed to the long-term approach, there's no indication of aggressive capital deployment or scaling of positions in the near term.
Language Signal
Language is predominantly opportunity-focused with terms like 'well positioned,' 'attractive,' 'strong momentum,' and 'secular forces.' Risk language is present but balanced with constructive framing of challenges as navigable through portfolio positioning.
Perceived Risk
Moderate risk acknowledgment including strengthening U.S. dollar headwinds, tariff pressures, geopolitical tensions, and policy uncertainty. Manager discusses specific risks like AI disruption concerns for India and competitive pressures, but frames these as manageable through positioning rather than systemic threats.
Opportunity Density
Manager sees selective opportunities in defined areas, particularly along the AI infrastructure value chain and in businesses benefiting from secular trends. Multiple new positions were opened, suggesting adequate opportunity set, but emphasis on selectivity and criteria-meeting businesses indicates measured rather than abundant opportunities.
Time Horizon
Strong emphasis on long-term approach with expected holding period of 5+ years and commitment to high-conviction, long-term strategy. Manager models 20 percent annualized earnings growth through 2029 for TSMC and discusses multi-year growth expectations for various holdings, indicating patient capital approach with multi-year thesis horizons.
