Fidelity Emerging Markets (FEML) is on a roll with a half-year total underlying return of 35.5% that smashed its benchmark and extends the three years of outperformance it reported at annual results in October.

For the six months to 31 December, shareholders enjoyed a 38.9% total return as the shares narrowed their gap, or discount, to net asset value to 7.8% from 10.5% in June. This was a response to the trust’s improved performance and the repurchase of 5.2% of its shares, including a big position held by the Strathclyde pension fund.

For a year as a whole, shareholders made 56.5% to put FEML in the top 10 best-performing investment companies.

By comparison, the MSCI Emerging Markets index advanced 18.1% in the second half of last year, although chair Heather Manners was pleased to report how the benchmark’s 24.4% sterling return in 2025 was almost double the 12.7% from the US-dominated MSCI World index.

She said this indicated a “remarkable shift in market leadership” given President Trump’s tariffs on global imports to the US and that the country’s US S&P index reached “no fewer than 38 new all-time highs during the year, as the rollout of artificial intelligence technologies continued to drive returns for some of its largest constituents”

While Trump’s weak dollar policy and erratic decision-making drove investors to emerging markets, FEML fund managers Nick Price and Chris Tennant had done well to bag returns from a large overweight in miners, especially copper, where it holds nearly 29% of gross assets compared to their 7% representation in the index.

Short positions, in which the managers bet that share prices will fall, had provided 5% of the outperformance over the six months.

The US and Israel war against Iran and the surge in oil prices had made the short-term outlook for emerging markets more uncertain. However, Manners said the long-term investment case remained strong and she was confident the mangers could “navigate these turbulent waters”.

Our view

Matthew Read, senior analyst at QuotedData, said: “There is no doubt that Emerging Markets have had a strong period, but FEML’s near-doubling of the benchmark return highlights the value of its approach – particularly its ability to hold both long and short positions as well as meaningful exposure to smaller companies and off-benchmark ideas. The heavy overweight to materials – especially gold and copper – has paid off, along with FEML’s selective exposure to the AI supply chain. Both illustrate a willingness by the manager to lean into structural themes that are often underrepresented in the benchmark. Clearly, this can create significant outperformance when those themes play out.”

“Looking ahead, the environment may become more volatile given geopolitical tensions and uncertainty around inflation and interest rates. However, many of the drivers behind EM’s recent strength – a weaker US dollar, supportive commodity markets and the region’s central role in global technology supply chains – are still in place, so there could be more to come.”

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