“The strong performance is driven by a weaker US dollar, stronger relative earnings revisions and improving return on equity (ROE) across emerging markets,” Desai told this news service in an interview this month. “Valuations are also cheaper in emerging markets compared to the US, with tech trading at a 30 per cent discount, and corporate governance is improving,” he said. Emerging markets also account for nearly 80 per cent of global GDP growth.

Desai co-manages the Irish-domiciled Emerging Markets Active Engagement Fund, which is classified under Article 8 of the EU’s Sustainable Finance Disclosure Regulation (SFDR). The fund aims to achieve capital growth and outperform the MSCI Emerging Markets Net Total Return Index. “The portfolio maintains a strong mid-cap bias rather than focusing on mega-cap names,” he said. It also focuses on AI infrastructure, with top sectors including tech, healthcare and industrials.

Desai believes that South Korea is an attractive market, with governance reforms improving capital discipline and market structure: “Equities in South Korea and Taiwan are cheaper, with a strong AI and tech story, and make up of 30 per cent of the portfolio.” Holdings include Korea’s tech semiconductor firm ISC Co as well as Taiwan Semiconductor Manufacturing Co (TSMC).

The firm also has an overweight position on Latin America, favouring, in particular, Brazil which has been a beneficiary of the rate cycle, an improving fiscal stance and commodity strength. Holdings include Brazil’s fitness chain Smart Fit. He recently sold Brazil's digital financial services platform Nu Holdings.

Desai increased his exposure to India recently, after a valuation reset due to weak performance in 2025 and an improving earnings' cycle. India also agreed a trade deal with the EU and US recently. Although Indian stocks remain quite expensive, Desai said undervalued stocks can still be found there. Holdings include India’s CNC machine tool manufacturing company Jyoti CNC Automation.

This stance is shared by others. A number of investment managers are positive about emerging markets this year. Paris-based asset manager  is also increasing his exposure to emerging markets. After lagging for several years, Melman believes that these stocks stand to benefit as investors reposition their portfolios away from the US – now that the AI cycle has reached maturity – and seek out new AI-related stocks. See here and here.