Seven funds trouncing a top market

Artificial intelligence (AI) euphoria has reached beyond the US market in the last year.

If the Magnificent Seven (and the hyperscalers among them) divide opinion, Asia’s Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM), Samsung Electronics Co Ltd DR (LSE:SMSN) and SK hynix Inc ADR (NASDAQ:SKHY) have produced huge gains as demand escalates for memory chips. 

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That has led that market up, with both the MSCI Emerging Markets index and MSCI AC Asia Pacific ex Japan delivering a sterling total return of around 26% in the 12 months to 13 October 2026.  

But as we have often seen in the US, such gains are accompanied by concerns that such returns are concentrated among a few shares which now dominate the index. 

TSMC accounts for 15.6% of the MSCI Emerging Markets index, with Samsung on 7.6% and SK Hynix on 5.9%. 

Active funds are trouncing the market 

Pleasingly, a good number of active funds have outperformed the market significantly, with the sheer level of gains on offer illustrated by recently published results from Fidelity Emerging Markets Ord (LSE:FEML).  

The board noted that the trust’s shares had returned 99.3% in the 12 months to the end of June – “effectively doubling investors’ money”. 

And while such returns have moderated significantly thanks to a sell-off in summer, they still look strong. 

The question is, how reliant are the top performers on those few leading stocks? 

Here, we highlight some of the top names over a 12-month period, and how they are currently positioned. 

The top names 

The table shows seven of the top Asia and emerging market funds, based on total returns in the 12 months to 13 October. 

We have also mapped out how exposed they were to TSMC, Samsung and SK Hynix within their top 10 holdings list.  

We also include exposure to SK Square, a company whose holding of SK Hynix shares accounts for most of its assets. 

It’s not among the top 10 constituents of the MSCI Emerging Markets index but can serve as a proxy for SK Hynix, and has enjoyed huge gains in the last year. 

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Open-ended funds often operate under the UCITS diversification rules, meaning they can’t have 10% or more of the portfolio in a single stock for a sustained period of time.  

In concentrated markets, that does give them a structural disadvantage, because they cannot have as big an allocation to TSMC as the market.  

Investment trusts, by contrast, only have to follow any internal diversification rules that they set. It therefore makes sense that multiple trusts appear in the table, having loaded up on TSMC. 

Source: FE/recent factsheets. Past performance is not a guide to future performance.

The company, which has enjoyed a 75% return over 12 months, accounts for 18.6% of the Templeton Emerging Markets trust. 

Investment managers still sound pretty bullish on the company, at least based on the last time the trusts filed their annual results. 

The last set of results for Templeton Emerging Markets, published in June, noted: “TSMC’s unrivalled leadership in advanced chip manufacturing makes it a key beneficiary of the growth in demand for AI chips.” 

Fidelity Emerging Markets’ recently published results, meanwhile, put it simply: “TSMC is a leading Taiwanese semiconductor manufacturer.  

“Its advanced technology and manufacturing capabilities support a strong competitive position and attractive returns on capital.” 

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Note also that we do include the top-performing index fund from the relevant sectors, and it can also have greater exposure to individual stocks thanks to the more relaxed diversification rules that govern passives.

The fund has delivered an astonishing 57% return in just 12 months, but is especially beholden to the fortunes of TSMC for this to continue. 

Note that we also see several funds with double-digit allocations to Samsung Electronics, as per recent factsheets. 

SK Hynix is less well represented in funds, although some funds do have a decent level of exposure if you also take note of their SK Square positions. 

Fidelity Emerging Markets is especially notable when it comes to its big bets on these few stocks. Both its TSMC and Samsung Electronics allocations are in the double digits, as is its total exposure to SK Hynix and SK Square. 

A breadth of offerings 

While concentration has been a big driver of returns for some, we nevertheless see some very different funds in the table. 

We have well-known generalist trusts such as Fidelity Emerging Markets and Templeton Emerging Markets. 

And even these can have their own idiosyncrasies: note that the Fidelity fund can take short positions that bet on a given valuation falling. 

The generalists also differ by their areas of focus beyond the few stocks we have mentioned. 

Fidelity Emerging Markets has reasonable allocations to China (15.8% of assets) and Brazil (10.4%), while Templeton Emerging Markets has roughly a fifth of its portfolio in China. 

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The iShares fund has a substantial allocation to Australia, as do the two income funds we include in our analysis, Schroder Oriental Income and Jupiter Asian Income. 

Meanwhile, SK Hynix and SK Square are nowhere to be found in the top 10 holding lists of the two income funds, presumably because those companies appear to offer barely anything in the way of dividend yield. 

Beyond China 

It’s finally worth noting the successes of Invesco Emerging Markets ex China. 

With China having had a volatile showing in the last year and big returns coming from Taiwan and South Korea, the fund’s focus on the latter two (each accounting for around a quarter of assets) seems to have paid off.  

Beyond China, it has reasonable allocations to India and Brazil. 

Ex-China funds in general have done well in the last year. But it’s worth noting that this active fund has outperformed an emerging markets ex-China ETF.  

Top holdings beyond the likes of TSMC include Hon Hai Precision Industry Co Ltd DR (LSE:HHPD), Kasikombank, MediaTek and HDFC Bank Ltd ADR (NYSE:HDB).