Emerging Markets Boom: Stars Aligned for 74% Returns

Opportunities in emerging markets are abundant following a decade of underperformance, according to Chris Tennant, co-manager of the Fidelity Emerging Markets Limited investment trust. He notes that strong commodity prices and demand from US tech firms for semiconductors are significant tailwinds. Additionally, innovation in China's solar energy and battery sectors, alongside undervalued companies in Eastern Europe and Latin America, presents attractive investment prospects.

The trust has demonstrated exceptional performance, achieving 74% returns for investors in the past year, more than double the average for similar global emerging markets trusts. Its portfolio includes major holdings such as TSMC and Samsung Electronics, alongside mining companies like Compania de Minas Buenaventura and Grupo Mexico. Chinese firm Sieyuan Electric, a privately owned business in the grid network sector, has seen its valuation soar from $6-7 billion to over $21 billion since the trust invested a year ago.

What sets Fidelity Emerging Markets Limited apart from rivals is its sophisticated use of financial instruments, including contracts for difference, to enhance shareholder returns. This strategy involves both shorting stocks expected to fall and going long on those anticipated to rise, effectively capturing gains from market movements. This approach contributed nearly a quarter of the fund's out-performance against its market index in the last calendar year.