Active GEM Funds: Q3 2026 Performance & Attribution
- Steve Holden
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Active GEM Funds: Q3 2026 Performance & Attribution
Two markets, one sector and three stocks did nearly all the work for active GEM funds this year
22 October 2026 · Steven Holden · Data to 30 September 2026
Active GEM funds kept pace, but returns were narrow
The average active GEM fund returned 22.95% in the first nine months of 2026, against 22.77% for the iShares MSCI Emerging Markets ETF. 58% of funds beat the index, with average alpha at a slim +0.18%.
Underneath, this is one of the most concentrated years for EM returns we have seen. This note breaks down the returns based on a portfolio of 347 active GEM funds, showing where managers won and lost against the benchmark, and which fund types came out ahead.
Korea and Taiwan tech delivered more than the whole return
South Korea (+14.44%) and Taiwan (+13.45%) have added 27.89% to the average fund return this year, about 120% of the total. Everything else detracted, with China & HK (-2.85%) and India (-2.00%) the most costly.
The sector view tells the same story. IT contributed 24.88%, and Korean and Taiwanese IT alone accounted for 24.82% of that. Strip those two out and the average GEM fund is down on the year.
Three chip stocks did two-thirds of the work
Samsung Electronics (+5.25%), SK hynix (+5.15%) and TSMC (+5.15%) added 15.55% between them, 68% of the average fund’s return. MediaTek (+2.16%) and SK Square (1.09%) provided additional support.
The biggest detractors were among EM’s most widely held stocks: Tencent (-1.22%), Alibaba (-0.67%) and HDFC Bank (-0.50%) led the way.
Wins in Korea, China and India; Taiwan the cost
The 0.18% lead over the index is the net result of several large calls that offset each other.
What added value: stock-picking in Korea (+1.58%, almost all selection). Underweights in China & HK (+1.03%) and India (+0.87%) also helped, as both markets fell double digits.
What subtracted value:
- Taiwan. Being 4.17% underweight a market up 81% cost 1.69% in allocation effects. Strong stock selection clawed back 1.32%, leaving a net cost of 0.37%.
- Cash. A 2.46% average weight cost 0.54%.
- Brazil. The largest overweight cost 0.39%.
IT: right stocks, wrong size
Technology stocks added 1.67% of net outperformance. Stock selection added 2.89%, but being 3.42% underweight the sector gave back 1.22%. Elsewhere, underweights in Materials (+0.42%) and Energy (+0.36%) helped. Financials (-0.46%, all stock selection) and cash (-0.54%) were the main drags.
Avoiding the losers mattered as much as owning the winners
The top three relative contributors were Korean and Taiwanese tech: SK hynix (+0.53%), SK Square (+0.49%) and MediaTek (+0.46%). But much of the rest of the list came from what managers didn’t own. Underweights in falling China and India names added up: Xiaomi (+0.34%), Pinduoduo (+0.29%), Reliance (+0.26%), and Alibaba and Meituan (+0.23% each).
On the other side, TSMC was by far the largest detractor (-1.08%) on a 4.14% average underweight. Overweights in CATL (-0.42%) and MercadoLibre (-0.25%) also hurt. The rest of the list is the AI supply chain that managers were light on: Nan Ya Plastics (+321%) and UMC (+215%) both cost money despite only small underweights.
In a narrow market, staying close to the index paid off
When returns are this concentrated in a handful of mega-caps, the funds that owned them won.
- Active share: low-active funds returned 25.49%, against 17.15% for high-active funds.
- Market cap: large/megacap funds returned 24.12%; small/midcap funds managed 15.52%.
- Style: GARP led at 26.54%. Aggressive growth trailed at 14.94%.
Dispersion was still wide. Nomura Emerging Markets returned 96.54%, while Virtus SGA Emerging Markets Equity lost 10.98%. Only five of the 347 funds lost money.
GEM Performance & Attribution Pack: Q3 2026
The full pack behind this piece: performance, country, sector and stock attribution for the average active GEM fund, plus 1, 3, 5 and 10-year peer rankings.
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