The big bets emerging market managers are taking

Asia and the emerging markets have been one of the standout equity regions in the past year, with excitement about the artificial intelligence (AI) theme generating some enormous returns.

But as has often been the case in the US, a lot of that return comes from just a few stocks. 

Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM) and South Korea’s SK hynix Inc ADR (NASDAQ:SKHY) and Samsung Electronics Co Ltd DR (LSE:SMSN) have produced some phenomenal gains and now make up a big chunk of the index.

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TSMC alone accounts for around 15% of the MSCI Emerging Markets index, with SK Hynix and Samsung Electronics making up around 12% between them. 

Those countries in turn have a big presence in the index, with Taiwan usurping China as the biggest allocation earlier this year.

Many active funds have produced some excellent returns during the market rally but stock pickers face the usual questions around how heavily to back the regions and stocks leading the way.

Examining just how exposed the funds you might use are to the markets with most momentum – and asking which are looking elsewhere – could have a big effect on future returns.

The big bets

If we look at some of the biggest active funds investing in Asia and the emerging markets, it becomes clear that those leading regions have become almost impossible to ignore. But managers are not blindly following the index.

What’s striking is that, while having big allocations to both Korea and Taiwan, a good number of funds are still heavily exposed to China. 

The MSCI China index is down by around 10.5% over 12 months in sterling terms and has more generally had a challenging half decade.

Federated Hermes Asia exJpn Eq F GBP Acc (B8449Z1) has an allocation of more than 40% to China, with the likes of Tencent Holdings Ltd (SEHK:700) and JD.com Inc ADR (NASDAQ:JD) in its top 10 holdings. 

Its top holding is still in TSMC, which accounts for around 9% of the portfolio.

Baillie Gifford Pacific B Acc (0606323), the open-ended sibling of the Pacific Horizon Ord (LSE:PHI) investment trust and a strong performer over the last year, has big allocations to both China and to Korea.

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The trust’s last interim report, published in early 2026, gives a sense of some of the team’s thinking here.

As they put it at the time: “China continued to accelerate its progression up the manufacturing and technological value chain.

“It is arguably the only credible competitor to the United States in artificial intelligence, quantum computing, drone technology and robotics, and is already a global leader in electric vehicles, batteries, solar manufacturing and power grid infrastructure.

“Importantly, the breadth and depth of China’s industrial capability continues to expand, with technological standards and product competitiveness rising rapidly across multiple sectors.”

That rationale prompted a “meaningful” increase in China exposure, with the team buying names like MiniMax Group Inc Ordinary Shares - Class A (SEHK:100) and Knowledge Atlas Technology as well as Alibaba Group Holding Ltd ADR (NYSE:BABA) and even certain gold miners.

Other regions standing out

If we look at some of the biggest funds out there, and some of the best performers, it’s difficult to find many portfolios with a double-digit allocation to a country that isn’t China, Korea or Taiwan. But a few names do stand out.

Some Asia funds can focus more on the Pacific region, leaving them able to invest in countries such as Australia. 

That’s the case for Jupiter Asian Income I GBP Inc (BZ2YMT7), a very strong performer from the last year that has around 29% of its portfolio in Australia. 

The fund, which doesn’t focus on countries such as China, also has a roughly 17% allocation to Singapore.

Schroder Oriental Income Ord (LSE:SOI) also has exposure here, with 16% in Australia and around 11% in Singapore.

India, once the darling of the emerging markets, is not a big position for many funds at the moment, although Ninety One Asian Equity has a roughly 14% allocation and JPM Emerging Markets C Net Acc (3088177) roughly 11%.

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Some funds have gone to the other extreme, with the manager of Henderson Far East Income Ord (LSE:HFEL) recently telling us that the fund had no money invested in the Indian market.

A few countries such as Brazil are slowly beginning to show up more prominently. 

That makes up around 11% of the Fidelity Emerging Markets Ord (LSE:FEML) trust and around 10% of the Invesco Em Mkts ex China UK Z Acc (B8N44B3) fund.

It might be telling, over a five-year period that has been tough for Chinese equities, that the Invesco fund is the top performer out of the relevant Investment Association (IA) and Association of Investment Companies (AIC) sectors. 

The fund has around 22% apiece in Korea and Taiwan, with India accounting for 11.2% of the portfolio.

Finally investors who want inspiration about the next up and coming market might always look at the BlackRock Frontiers Ord (LSE:BRFI) investment trust, which can be a risky name but has fared well in recent years.

The countries most prominent in the fund right now are the United Arab Emirates, Saudi Arabia, Kazakhstan, Egypt, Kenya, Thailand and Poland.