Artemis SmartGARP Global Emerging Markets Equity Fund update

Source for all information: Artemis as at 30 June 2025, unless otherwise stated.

Fund objective

The fund’s objective is to grow capital over a five-year period. 

Summary

A weaker dollar and efforts by investors and fund managers to diversify away from assets denominated in the US currency¹ have provided positive catalysts for a recovery in emerging market shares, which have outperformed global stockmarkets so far this year: the MSCI Emerging Markets index² rose 5.3% during the six months to 30 June 2025 in sterling terms compared with 0.6% for the MSCI All Country World index, according to Lipper. 

The fund’s bias towards shares that we consider to be undervalued remains substantial. The fund has a forward price-to-earnings ratio of 8.9x versus 12.6x for the MSCI Emerging Markets index – a 29% discount³. (The price-to-earnings (P/E) ratio is used to value a company's shares. It is calculated by dividing the current market price of a company's shares by the company's earnings per share.)  

Yet despite being cheaper than its benchmark, our portfolio also has more favourable quality and growth characteristics⁴. 

We think our discipline around valuations is likely to be a rewarding strategy for the years ahead.   

Performance

During the second quarter of 2025, the Artemis SmartGARP Global Emerging Markets Equity Fund gained 5.7% in sterling terms⁵, compared with 5.5% for its first benchmark, the MSCI Emerging Markets index, and 5.9% from its second benchmark, the IA Global Emerging Markets sector⁶. Performance for the past five years is shown in the table below.       

For the past five calendar years of performance, please see the table below. Please remember that past performance is not a guide to the future. 

Contributors/detractors   

Many of our peers have chosen to avoid China, with some deeming it to be uninvestable⁷. We disagree. We have no particular edge with calling the direction of markets. However, we have become convinced that the risk/reward trade-off in some companies in China is the best among all global stockmarkets, in our view, while balance sheets also look healthy.  

Although our enthusiasm for China proved to be a headwind from an asset allocation perspective, our stockpicking has more than compensated for the risks taken in the past few years. Sino Biopharmaceutical, People’s Insurance Company of China (PICC) and CMOC, which mines and processes cobalt, copper and other metals, all featured among our top contributors this quarter. 

Elsewhere, our stock selection in India continues to perform well. Telecoms infrastructure giant Indus Towers and software developer Redington both rose significantly in the period. These were offset by weakness in consumer names, with auto manufacturers suffering against a backdrop of tariff threats. Our lighter weighting to semiconductors also hindered performance relative to our benchmark. 

Activity 

Korean stocks have experienced strong returns this year⁸. A period of political calm alongside favourable shareholder policies and a healthy economy have been supportive. We hold around 12% of our fund in Korean stocks trading at or below book value (the value of their assets). We think that as sentiment improves, these stand to perform well. 

We added Samsung in early April and have built the position to an overweight (above average) stance against the index since then. The memory cycle appears to be bottoming out and the shares trade below book value⁹. The share price stabilisation and a recovery of fundamentals provide a good backdrop for better returns ahead, in our view. 

In the past few months, we have been adding to consumer companies in China. Pessimism has reached extreme levels and with low investor positioning¹⁰, we felt the risk/reward trade-off had become extremely favourable. We have observed a clear disconnect between share prices and the financial performance of businesses¹¹. During the quarter, we increased our positions in CMOC, telecoms infrastructure company China Tower and Sino Biopharmaceutical.  

Elsewhere, we boosted our exposure to Latin America. The region benefits from a weaker dollar and a neutral political position with the US, in our view. Among financials we added Banco Bradesco and PagSeguro in Brazil and increased our stakes in Peru's Credicorp and Chile's Banco Santander. We also bought Copa Airlines. 

We believe that as a result of these changes, the fund continues to offer an attractive combination of extremely low valuations and attractive growth prospects.  

We have a higher allocation to China than our benchmark – in other words, we are overweight – and we also have a larger weighting to Brazil, Korea and the United Arab Emirates. Conversely, we have less than the benchmark in India, Taiwan and Saudi Arabia, where we are underweight. At the sector level, financials, consumer discretionary and industrials feature as the largest overweights, whereas technology and consumer staples are the largest underweights.      

Outlook

Catalysts for a recovery in emerging markets appear to be on the horizon. China remains in stimulus mode¹², while monetary policy easing across a number of emerging markets¹³ provides further liquidity and could be supportive of economic growth. As many emerging market companies borrow in dollars¹⁴, weakness in the US currency eases funding risks and boosts corporate profits. We believe emerging markets also offer diversification against US-centric risks. In our view, these factors make the sector very hard to ignore. 

In the past six months, global stockmarkets have experienced some turbulence, yet also enjoyed a strong recovery. We believe that the key lesson here is to invest in undervalued assets, reinvest during drawdowns and let profits and dividends do their work.  

The main risk to emerging markets, in our view, is profits faltering, but we believe Artemis’ SmartGARP software has already tilted us towards more resilient, lower-risk holdings. So despite market noise and the threat of US tariffs (taxes on imports), we think our positioning looks well judged.