07 January Emerging Markets

Active GEM Funds: Performance & Attribution 2025

Global Emerging Markets

Active GEM Funds: Performance & Attribution 2025

January 7th 2026

Executive Summary

  • Strong Year for Active EM: Active GEM funds returned 32.2% in 2025, their second-best in 15 years, with nearly half outperforming the benchmark.

  • Style & Regional Leaders: GARP and Value strategies led performance, boosted by South Korea-heavy positioning and tech exposure.

  • Tech and North Asia Dominated: Technology alone added 13.2%, while Taiwan, South Korea, and China/HK contributed 70% of total returns.

  • Concentrated Stock Impact: Just 10 stocks — including TSMC, SK Hynix, and Samsung — drove half the year’s gains.

  • Attribution Wins & Losses: Outperformance came from underweights in Saudi and India and strong stock selection in Taiwan and Korea; cash drag and poor selection in China/South Africa weighed.

  • Passive Still Average: The MSCI EM ETF again landed near the 50th percentile, continuing a long-term trend of middling returns versus active peers.

A Strong Year for Emerging Markets

Active GEM funds enjoyed one of their strongest years in over a decade, delivering an impressive average return of 32.2% in 2025 — their second-best annual performance in the last 15 years. Despite falling just short of the iShares MSCI EM ETF, nearly half of active managers managed to outperform the benchmark.

The top of the performance table was dominated by South Korea-heavy strategies, with Macquarie and a cluster of Value and GARP-oriented funds leading the charge. GARP strategies emerged as the best-performing style group, posting average returns of 37.8%, followed closely by Value funds at 36.5%. In contrast, Aggressive Growth funds lagged well behind, averaging just 25.97%, while Small and Midcap strategies also underperformed.  With an 83% gap between the best and worst performer, it once again highlights the breadth and diversity of the EM active universe.

Asian Technology Drives Returns

The charts below break down the components of the 32% average return for active GEM funds in 2025, using a portfolio based on managers’ aggregate holdings. At the sector level, Technology was by far the largest contributor, adding 13.2% to returns. Financials followed at 7.6%, with Communication Services, Consumer Discretionary, Industrials, and Materials each contributing between 2.5% and 3%.

From a country perspective, Taiwan, South Korea, and China & Hong Kong were the dominant drivers, together contributing 23.5% — around 70% of total returns. Leading country-sector combinations included South Korea and Taiwan Technology. On the downside, a handful of areas pulled returns lower, with India Tech, Argentina Tech, and Indonesian Financials together costing just under 0.9%.

Stock Level Influence
At the stock level, just 10 names accounted for half of the year’s returns — led by TSMC, SK Hynix, and Samsung Electronics. Standout gains from select South Korean stocks, including SK Hynix and SK Square, were major contributors, as were gold miners like Anglogold Ashanti and Gold Fields.

Losses were fewer and generally more modest. However, well-held positions in Meituan and Infosys weighed on performance, ranking among the year’s key detractors.

Performance Attribution – Where Funds Beat the Benchmark
The chart below highlights the main sources of outperformance and underperformance versus the benchmark at the country level. The biggest contributors were large underweights in Saudi Arabia and India, alongside strong stock selection in Taiwan and South Korea.

On the negative side, returns were held back by cash drag, overweights in Argentina and Indonesia, and weak stock selection in China and South Africa.

Stock Attribution
Active EM managers gained from net overweights in key outperformers such as SK Hynix and SK Square, with smaller positive contributions from Delta Electronics and ASPEED Technologies. Underweights in weaker names — including Meituan, Saudi Aramco, International Company for Water & Power, and Xiaomi — also added to relative performance.

On the negative side, a 2.5% net cash position limited upside, while underweights in TSMC and Alibaba meant managers missed out on key benchmark gains. Overweights in Globant, MakeMyTrip, and MercadoLibre also detracted from relative returns.

Long-Term Performance
This year’s mild underperformance adds to a small shortfall in 2024, yet the broader picture remains clear: over the past 22 years, active GEM funds have outperformed in 14 of them — and typically by a greater margin than in the years they’ve lagged.

Meanwhile, the iShares MSCI EM ETF has consistently delivered middling results, rarely straying far from the 50th percentile and never ranking among the top performers. For investors seeking to capture the full potential of EM, a purely passive approach has proven to be — at best — an average decision.

Performance & Attribution Report

Click the link opposite for full charts and data detailing the drivers of 2025 performance, along with a review of 3-, 5-, and 10-year results across the active EM peer group.