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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Baillie Gifford -Emerging Markets 2025 Q1 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q1 2025 Letter Analysis

Baillie Gifford -Emerging Markets Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Baillie Gifford -Emerging Markets. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Annualized+10.92%

Positioning StanceConstructive

GeographyEmerging markets, Asia, LatAM

Digest Analysis

Quick Take

"Emerging Markets hit an inflection point in Q1 with China leading the charge through policy support and AI innovation via DeepSeek. Portfolio added China exposure while benefiting from strong performance in MercadoLibre and SEA."

Executive Summary

Baillie Gifford's Emerging Markets strategies outperformed the US in Q1 2025, driven by compelling valuations that began the year at 20-year lows. The primary catalyst has been China's policy inflection, with Xi Jinping's meeting with tech entrepreneurs signaling government commitment to growth and private companies. The DeepSeek AI breakthrough has reignited investor interest in Chinese innovation, with portfolio companies like Baidu, Tencent, and Ping An adopting the technology to reduce costs and drive growth. The main portfolio move has been adding China exposure. Key contributors included MercadoLibre, which demonstrated its adaptive capabilities, and SEA's ecommerce platform. While tariff risks persist, Emerging Markets have been navigating trade tensions since 2018, with companies like TSMC successfully adapting through geographic diversification. The team added Globant, an AI-focused IT services company, as a new holding. With Emerging Markets trading at significant discounts to developed markets despite superior growth potential and innovation, the managers believe they have reached an inflection point that could drive significant capital flows.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

75%

CautiousHigh

High Conviction (75%)

High conviction expressed through decisive portfolio moves like adding China exposure and new holdings. Strong language about inflection points and structural opportunities, with specific catalysts identified like DeepSeek and policy support.

Growth Outlook

75%

BearishBullish

Bullish (75%)

Strong optimism expressed about Emerging Markets reaching an inflection point with compelling valuations and China's policy support creating favorable conditions. Manager states EM economies have competitive advantages and companies with more growth potential than appreciated.

Risk Appetite

60%

DefensiveAggressive

Balanced (60%)

Moderate risk-on positioning with the main move being adding to China exposure during the quarter. Portfolio actively deployed capital into new holdings like Globant while maintaining selective approach to other markets like India due to valuation concerns.

Capital Deployment

50%

De-riskingDeploying

Net Neutral (50%)

Moderate deployment activity with main move being adding to China exposure and new holding in Globant. Active research trips across multiple countries suggest preparation for deployment, but no specific cash level changes mentioned.

Forward Guidance

70%

CautiousExpansionary

Expansionary (70%)

Bullish forward guidance with expectations of significant flows into Emerging Markets if fundamental growth is recognized. Manager expresses excitement about opportunities and actively looking for new ideas, particularly in Vietnam and other markets.

Language Signal

65%

BearishBullish

Bullish (65%)

Predominantly positive language with terms like 'inflection point', 'compelling valuations', 'exciting opportunities', and 'significant potential'. Some acknowledgment of challenges like tariffs but overall tone emphasizes upside and opportunity.

Perceived Risk

40%

Low RiskElevated

Moderate Risk (40%)

Moderate risk acknowledgment focused on tariff impacts and geopolitical tensions, but manager emphasizes EM's experience navigating these challenges since 2018. Risk discussion balanced with opportunity focus rather than systemic concerns.

Opportunity Density

80%

ScarceAbundant

Abundant (80%)

High opportunity density with manager highlighting compelling valuations across EM, specific opportunities in China, Vietnam, and other markets. Multiple research trips uncovered new ideas and strengthened conviction in existing holdings.

Time Horizon

85%

Short-TermLong-Term

Decade+ (85%)

Long-term orientation clearly stated with 5-10 year investment horizon mentioned explicitly. Focus on structural opportunities, compounding growth stories like MercadoLibre held since 2010, and multi-year themes like AI adoption and energy transition.