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Why Emerging Markets?


Fidelity - Research team

To build a dynamic investment portfolio fit for the future, investors need to align themselves with areas of compelling structural growth. That growth is likely to be found in the world’s emerging markets, whose younger, more dynamic economies provide fertile ground for companies to thrive.

Emerging markets are home to over 80% of the world’s population1 and generate around half of its economic activity. Developing economies account for around four-fifths of global economic growth2, driven by young, dynamic populations. By some estimates, growth in emerging and developing economies could be almost four times higher than in developed economies this year3

These developing economies are home to opportunities that can’t be found elsewhere. Emerging markets are plugged into vast structural growth trends, from producing the commodities necessary for the energy transition to providing exposure to rising credit penetration and fundamental shifts in global supply chains.

Emerging market companies are on the cutting edge of global innovation. Increasingly, technological developments are every bit as exciting in India, Korea, or Taiwan as in Silicon Valley. Emerging market companies can tap into fast-growing, dynamic domestic markets while also having a global reach. Emerging economies also offer exposure to companies in the materials and financials sectors, which stand to benefit in an environment of elevated inflation and higher interest rates.

While we would expect emerging markets to be more volatile, they also sidestep many of the risks of developed markets, such as ageing populations, slow growth, and high debt. Although aspects like geopolitical risk require much closer scrutiny, some other risks historically associated with emerging markets have eased – fiscal positions have strengthened, with many countries having better current-account balances and more significant foreign-exchange reserves, while improving governance means companies offer greater transparency than before. 

Why Fidelity?

At Fidelity, we put ourselves in a prime position to find these exciting companies wherever they are in the world. We are embedded in these markets around the globe, meeting management teams and the competitors and suppliers of companies, spending time understanding the domestic landscape in which these companies operate.

This allows us to find opportunities often overlooked by the wider market, particularly among smaller and medium-sized companies. These companies tend to be less well covered by analysts, leaving them under-researched and potentially mispriced, providing fertile ground for active fund managers.

Our global platform also allows us to put each opportunity in context. We can piece together what is happening in the US or Japan with developments in emerging markets. Our global analysts provide expertise across multiple companies and sectors, including in the small and mid-cap sectors. This analytical reach offers us an informational edge and sets us apart.

Why Fidelity Emerging Markets Limited?

Fidelity Emerging Markets Limited has a ‘go-anywhere’ approach, seeking out opportunities wherever they emerge across the developing world. The investment company seeks to invest in good quality businesses that can sustainably grow over long periods of time. It looks for companies benefiting from long-term growth trends as countries emerge and develop, from rising air travel to financial inclusion and technological innovation. We aim to invest in companies with dominant franchises, strong balance sheets and capable management teams that are well-positioned to take advantage of the abundant structural growth opportunities across developing markets.

While looking for those structurally growing companies, we will also find struggling companies where we believe the share price is likely to fall. We look to take advantage of these as well, taking out short positions in these companies. We also carefully manage risk, striving to ensure our investors can harness emerging markets’ evolution and growth without experiencing every bump in the road.

Fidelity Emerging Market Limited looks to harness our comprehensive global analyst resource to find exciting opportunities wherever they are in the emerging world, seeking to ensure we maximise our ability to profit from businesses of all kinds: both the successful and failing, the large and the small, the disruptors and the disrupted.



Important information
The value of investments can go down as well as up and investors may not get back the amount invested. Overseas investments will be affected by movements in currency exchange rates. The use of financial derivative instruments for investment purposes, may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This Investment Company invests in emerging markets which can be more volatile than other more developed markets. Investors should note that the views expressed may no longer be current and may have already been acted upon. The shares in investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.