Emerging market equities have had a strong 2025, climbing 19% in EUR to outperform developed markets (+8%) and most major asset classes since the start of the year. The main driver of the EM rally has been the re-pricing of stocks with AI exposure, with South Korea (+73%), Taiwan (+25%) and China (+22%) the main country beneficiaries, while Poland (+44%), South Africa (+41%), Mexico (+32%) and Brazil (+27%) have also performed strongly[1].
Country returns have been wide-ranging this year with Indonesia (-12%), Malaysia (-4%) and Thailand (-4%) among the weakest due to political uncertainty in Southeast Asia, while India (-7%) has also been disappointing, weighed down by sluggish corporate earnings and negative tariff outcomes. The portfolio managers have been researching investment opportunities in these countries created by their large relative drawdowns and recently returned from a trip to India, where the fund has been underweight in recent years due to lofty valuations.
SKAGEN Kon-Tiki’s country positioning as a result of its stock selection has helped to deliver impressive returns this year. The fund is up 26% since the start of 2025 – nearly 7% ahead of the MSCI EM Index – and is also beating its benchmark over one-, three- and five-year periods, as well as since inception[2]. Among its top five positive contributors are Alibaba and Tencent-owner Prosus, which have re-rated as the market has recognised the potential future earnings potential of the Chinese tech giants’ substantial AI investments. Korean holdings, Samsung Electronics and Hana Financial, have also delivered strong returns with the latter boosted by the country’s Value Up corporate governance reforms which have particularly benefited the financial services sector.
TSMC has been the fund’s other big winner in 2025. The Taiwanese company remains strongly positioned in the semi-conductor supply chain and has grown sales by more than 40% year-on-year in USD, supported by high demand for AI servers. Since first entering the fund in October 2022, the portfolio managers have taken advantage of share price weakness to increase its position in the portfolio – most significantly following its drawdown in May this year – and it is now Kon-Tiki’s largest holding at 9% of NAV.
Active portfolio management
In addition to actively managing the TSMC position, portfolio turnover has been boosted by successfully re-sizing other positions during periods of market volatility. The composition of the fund has also changed with six companies departing and nine new holdings joining the portfolio this year, leaving Kon-Tiki with 47 positions diversified across geographies, sectors and economic drivers.
Its active management means that the portfolio has estimated upside of around 30% and remains valued at a large discount to the market[3]. Based on multiples of earnings, book value, sales and cash flow, the fund trades 40%-60% below both the MSCI EM Index and peers, while retaining comparable quality based on ROE and Morningstar analysis.
Looking ahead, the outlook for emerging markets remains attractive. Despite the recent rally, valuations generally are attractive, relative to both historic averages and developed markets, where the gap is still historically wide. Earnings expectations are also positive with consensus currently forecasting double-digit EPS growth in both 2025 and 2026, underpinned by strong economic expansion with the latest IMF projections showing EM GDP growth of 4.2% this year and 4.0% next, which is more than double the 1.6% expansion expected across advanced economies for both years[4]. Another potential tailwind is continued US dollar weakness which has historically correlated with stronger equity returns relative to developed markets.
For SKAGEN Kon-Tiki, which combines active portfolio management with a disciplined price-driven approach and a small / mid cap tilt, we are confident that the fund is well-placed to close its material valuation discount to the market and continue delivering value for unit holders.
Watch a recording of the recent webinar: Market update with SKAGEN Kon-Tiki
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All information as at 31/10/2025 unless stated otherwise
[1] As at 30/09/2025. Valuation estimates based on SKAGEN Kon-Tiki’s independent analysis and may differ from consensus estimates.
[2] Source: IMF World Economic Outlook, October 2025.
[3] As at 31/10/2025 net of fees.
[4] Source MSCI. MSCI Indices in EUR as at 31/10/2025.