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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Baillie Gifford -Emerging Markets 2026 Q3 Investor Letter | Buyside Digest

Back to Fund Profile (Baillie Gifford -Emerging Markets)

Primary Source Intelligence • Q3 2026 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

QTD-4.46%

YTD+23.63%

Annualized+10.92%

Positioning StanceCONSTRUCTIVE

GeographyEmerging markets

Digest Analysis

Quick Take

"Constructive on emerging market leaders, maintaining a barbelled portfolio anchored in generational artificial intelligence hardware demand and geopolitical energy hedges, while establishing new positions in financial and optical hardware compounders."

Executive Summary

The fund recorded third-quarter net returns of -4.46% for the K Class and -4.49% for the Institutional Class, trailing the MSCI Emerging Markets Index net return of -0.24%, while year-to-date net performance reached 23.63% and 23.54% respectively. Relative quarterly performance was weighed down by stock-specific drags in semiconductor connectivity and data center equipment, alongside country underperformance in China and Taiwan. The strategy maintained a fully invested posture with cash representing 0.66% of the portfolio, operating with an active share of 58% across 79 holdings and balanced between structural and cyclical growth drivers. Macroeconomic commentary focused on the structural resilience of emerging market sovereigns against higher United States interest rates, highlighting conservative fiscal deficits and orthodox monetary policies compared to developed economies. The team emphasized that artificial intelligence capital expenditure continues to expand robustly among hyperscalers, creating persistent bottlenecks in high-performance memory and custom silicon. In parallel, disciplined energy positioning was leveraged as an operational hedge to generate non-correlated cash flow against geopolitical friction in the Middle East. Portfolio activity during the quarter included initiating new positions in Bajaj Finserv, Hongfa Technology, and Sunny Optical Technology to capitalize on domestic credit penetration and AI optical components. To reallocate capital into higher-conviction opportunities, the manager executed complete sales of Axis Bank, Brilliance China Automotive, Hyundai Motor, and Tencent Music Entertainment following stretched valuations and thesis revisions.

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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

72%

CautiousHigh

High Conviction (72%)

Positioning displays decisive concentration across anchor technology names such as TSMC at 14.5% and Samsung Electronics at 10.2%, alongside an explicit willingness to endure market drawdowns. However, the overall portfolio spans 79 holdings across 21 countries, keeping active share at 58% and slightly moderating pure portfolio-level conviction.

Growth Outlook

70%

BearishBullish

Bullish (70%)

Leadership articulates strong optimism regarding the multi-year secular runway for artificial intelligence adoption and emerging market sovereign resilience. While recognizing macroeconomic risks from higher US interest rates and Middle East geopolitical shocks, the tone remains distinctly constructive on equity compounding.

Risk Appetite

75%

DefensiveAggressive

Aggressive (75%)

Capital remains almost entirely deployed in equities with cash held at a negligible 0.66%, indicating a fully invested pro-risk posture. The fund actively maintains elevated beta exposure to cyclical and structural growth names while using energy holdings to counterbalance market volatility.

Capital Deployment

60%

De-riskingDeploying

Net Neutral (60%)

Cash balances remained stable at a low 0.66%, reflecting full operational deployment with neutral net cash movements. New position initiations were fully funded by proceeds harvested from complete divestments rather than cash drawdowns.

Forward Guidance

65%

CautiousExpansionary

Expansionary (65%)

Management demonstrated an active deployment bias by initiating new stakes in Bajaj Finserv, Hongfa Technology, and Sunny Optical while adding to Latin American fintech. Capital redeployment is methodically funded by trimming stretched valuations and exiting commoditized banking franchises.

Language Signal

70%

BearishBullish

Bullish (70%)

Commentary heavily emphasizes generational technological opportunities, mispriced multi-year growth, and resilient fundamentals across key holdings. Negative language is largely limited to describing company-specific margin pressures, temporary product rollout delays, and broader macro volatility.

Perceived Risk

60%

Low RiskElevated

Moderate Risk (60%)

The managers explicitly detail systemic risks including elevated US interest rates, supply chain shortages in memory and circuit boards, antitrust scrutiny, and Middle Eastern geopolitical disruptions. However, these factors are analyzed as manageable background conditions rather than acute existential threats.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

The investment team describes an abundant universe of compelling opportunities, specifically highlighting the rapid diffusion of AI across diverse emerging market industries. Capital was reallocated without friction from fully valued automotive and media names into newly discovered compounders.

Time Horizon

85%

Short-TermLong-Term

Decade+ (85%)

The fund explicitly anchors its investment proposition on a five-year horizon and refuses to trade around daily headlines or short-term volatility. Key positions such as Petrobras have been maintained for nearly a decade, underscoring an enduring patient ownership philosophy.