This report offers an in-depth analysis of the Wasatch Emerging Markets Select Fund's performance during 2025, highlighting key factors influencing its outcomes and outlining strategic shifts. It further examines broader trends in developing economies and the fund's positioning for future growth, particularly in areas like artificial intelligence and semiconductors.
Navigating Volatility: A Comprehensive Look at Emerging Market Investments
Underperformance in 2025: Key Contributors and Market Context
Throughout 2025, the Wasatch Emerging Markets Select Fund recorded a notable underperformance against its benchmark, the MSCI Emerging Markets Index. A significant factor contributing to this was the fund's strategic underweight allocation to Korea. Additionally, challenges in selecting specific stocks, particularly within several major holdings, further impacted its overall returns. This occurred within a broader market environment where developing-nation equities generally experienced an uptick in the fourth quarter. This positive momentum was largely fueled by increasing anticipation of a more relaxed monetary policy in the United States, following the Federal Reserve's interest rate adjustments in mid-September. The inherent resilience demonstrated by emerging economies also played a crucial role in supporting this asset class.
Strategic Realignments for Future Growth: Focusing on AI and Semiconductors
In response to evolving technological landscapes and market demands, the Wasatch Fund has strategically re-evaluated and repositioned its holdings in Taiwan. This realignment is specifically aimed at enhancing exposure to the burgeoning artificial intelligence (AI) ecosystem and the broader semiconductor value chain. Companies such as ASPEED Technology and Chroma ATE, which are integral to these sectors, have shown robust performance, driven by the increasing demand for AI-related technologies. These adjustments underscore the fund's proactive approach to capitalizing on high-growth areas within the emerging markets.
Investment Outlook: Favorable Valuations and Strong Earnings Potential
Looking ahead, the fund presents an optimistic outlook supported by its current valuation and expected earnings trajectory. The weighted average 12-month forward Price-to-Earnings (P/E) ratio for the fund's portfolio currently stands at a multi-year low, suggesting an attractive entry point for investors. Management projects a compelling growth profile, anticipating revenue and earnings increases in the high-teens to over 20% across its core holdings. This forecast reflects confidence in the underlying strength of the companies within the portfolio and their capacity to deliver substantial returns.
Market Dynamics: Emerging Markets Outshine Developed Counterparts
After a prolonged period spanning more than a decade where equities in developed markets consistently surpassed those in emerging markets, 2025 marked a significant shift in market leadership. This reversal was a welcome development for investors focusing on emerging economies, indicating a potential new cycle of outperformance. The observed gains in developing-nation stocks during the fourth quarter, influenced by U.S. monetary policy expectations and the robust performance of local economies, highlight a renewed investor interest and confidence in these markets.
Wasatch Global Investors: A Legacy of Focused Investing
Wasatch Global Investors, a 100% employee-owned firm established in 1975, maintains its headquarters in Salt Lake City, Utah. Drawing its name from the adjacent Wasatch Mountain Range, the company is renowned for its extensive expertise in micro-, small-, and mid-cap investing across both U.S. and international markets. The firm fosters a corporate culture that champions collaboration, strives for excellence, and encourages deep intellectual curiosity. Registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940, Wasatch Global Investors continues its commitment to rigorous and insightful investment practices.
