Fidelity Emerging Markets Ltd: well-placed to weather the storm

The long-term repercussions of the conflict in the Middle East remain unclear, with the resulting uncertainty affecting many parts of the global economy. One of the regions most directly impacted is the emerging markets (EM), which includes both major oil importers and exporters.

Emerging markets benefit from important structural tailwinds, including good fiscal discipline, a key role in the global AI supply chain, and a weaker US dollar that a lot of economies rely on for funding. However, the recent disruption to oil prices has raised concerns about inflation and interest rates.¹

It is likely that some investors operating in the area will weather the storm better than others. A possible example is the Fidelity Emerging Markets investment trust, which is an unusual fund where returns are primarily driven by the managers’ stock selection decisions.

Objective and approach

Fidelity Emerging Markets aims to achieve long-term capital growth from a portfolio of listed and unlisted emerging market equities. Managers Nick Price and Chris Tennant adopt a highly active, unconstrained approach and make full use of the investment trust structure to access opportunities across the market cap spectrum.²

The portfolio is built on a bottom-up, fundamentals-driven basis, focusing on quality businesses with strong balance sheets, consistent returns and reasonable valuations. It bears little resemblance to the benchmark, with the sector and country exposures determined by the stock selection decisions.³

Price and Tennant are supported by Fidelity’s extensive emerging markets team, which consists of around 50 investment professionals located in key regional hubs. Unlike many investment trusts, they are able to use derivatives to combine long positions in structurally advantaged companies with selective short positions in weaker stocks where share prices are likely to fall.⁴

The underlying portfolio

At the end of February, the largest holdings included Taiwan Semiconductor Manufacturing Company and Samsung Electronics, both of which have benefitted from strong demand for AI chips from the US tech sector. There were also overweight positions in a range of mining companies that have profited from rising commodity prices.⁵

The key sector weightings were Information Technology and Financials at 36.5% and 33.7% respectively, followed by Materials and Industrials at 19.1% and 18.1%. Another notable feature was the allocation of around a third of the portfolio to mid-cap stocks in the £1bn to £5bn range, well above the benchmark representation of 4.9%.⁶

It is a highly unusual portfolio with a gross market exposure - long positions, plus short positions, less any hedging - of 164.2% of total net assets.⁷ This means that stock selection is the key driver, and the approach appears to be working, with nearly a quarter of the outperformance in 2025 attributable to successful short positions.⁸

Performance

According to the interim accounts for the six months ended December 2025, the NAV and shareholder total returns were 34.5% and 38.9% respectively. These were materially ahead of the MSCI Emerging Markets benchmark, which added 18.1%.⁹

The trust experienced a challenging period after the mandate was moved to Fidelity in October 2021, but performance has since recovered, with strong absolute returns and meaningful outperformance of the index. This improvement is likely to have a bearing on the continuation vote and conditional tender offer scheduled for later in the year.¹⁰

Like many other investment trusts, Fidelity Emerging Markets has been caught up in the volatility following the conflict in the Middle East, yet it appears well-placed to weather the storm. The significant overweight position in materials should benefit from higher inflation, while the underweight exposure to major oil importers like China, India and Korea - combined with an overweight position in oil exporter Brazil - appears well judged.

What are the managers’ latest views?

Writing in the recent accounts, the managers said that emerging markets continue to benefit from a relatively strong fiscal position versus developed markets, attractive valuations, and a supportive earnings backdrop, underpinned by commodity strength and AI-driven demand for key EM tech companies.¹¹

“That said, recent concerning events in the Middle East have clearly added complexity, increasing volatility, prompting some de-risking, and pushing oil prices higher, with potential implications for inflation. While near-term uncertainty has risen, many of the structural drivers that supported EM over the past year remain in place, although clearly volatility remains elevated, and in particular the path for inflation and interest rates has become less certain.”¹²

Buybacks, discount and costs

Since the manager’s appointment in October 2021, the trust has purchased 79 million shares, representing 65.1% of the share capital then in issue. This includes two substantial tender offers and a large buyback from the Strathclyde Pension Fund in November 2025.¹³

Despite this significant activity, the shares continue to trade at a discount to net NAV of 8%, close to the 12-month average.¹⁴ The next five-year continuation vote is due to take place at the AGM in December 2026.

Based on the latest accounts, the ongoing charges figure is 0.83%,¹⁵ which appears good value for a successful, actively managed emerging markets fund.

Past performance is not a reliable indicator of future returns.
^{Source: Morningstar as at 31.03.2026, bid-bid, net income reinvested.
©2026 Morningstar Inc. All rights reserved. The MSCI Emerging Markets Index is a comparative index of the investment trust.}

Source:

^{1,2,3,4,9,10,13} Investec, 18.3.26
^5,6,7 Fidelity Emerging Markets Trust, factsheet as at 28.2.26
⁸ Manager interview published in the Mail on Sunday, 8.2.26
^11,12,15 Fidelity Emerging Markets Trust, accounts for the 6 months ended December 2025
¹⁴ Fidelity International, 13.4.26