In the latest instalment of Monday Manager, Portfolio Adviser speaks to Xavier Hovasse, manager of the €668m Carmignac Emergents fund.
He shares the fund’s top themes, why Asian counterparts to the magnificent seven offer “exceptional profitability” and taking advantage of weakness in Western economies.
The Monday Manager series covers fund managers that have managed the fund in question for over three years, and where fund assets are over £100m.
Tell us about the Carmignac Emergents fund. When was it launched and why?
Carmignac has been a committed investor in emerging markets since its inception in 1989. Established in 1997, Carmignac Emergents is an actively managed equity fund focused on emerging markets. The fund blends a fundamental top-down perspective with rigorous bottom-up analysis to uncover long-term, high-growth opportunities across these dynamic markets.
What is it trying to achieve for investors?
Our objective is to deliver returns that exceed the reference benchmark over a period of more than five years. As an Article 9 fund, we are also committed to making a positive impact on both the environment and society, whilst ensuring the portfolio maintains a low carbon footprint.
Which regions are you favouring? And which themes?
At present, we have a significant allocation to technology companies that are direct beneficiaries of the AI revolution, chiefly located in Taiwan, Korea, and China. Notably, TSMC, Samsung, and SK Hynix (alongside its parent company, SK Square) together represent approximately a quarter of the fund. These firms hold leading positions in the semiconductor foundry sector and advanced memory solutions, both of which are crucial for AI chip production. Their products are indispensable to the ongoing rapid, large-scale development of AI and underpin substantial economic growth within the technology industry.
These companies are, in many ways, the Asian counterparts to the so-called ‘magnificent’ firms in the US. They stand out for their exceptional profitability, impressive margins, and strong growth prospects, yet they remain attractively valued, especially when compared with their American peers.
See also: Carmignac appoints Waistell as portfolio manager
China also continues to play a pivotal role: when China’s economy performs well, the positive effects are felt throughout all emerging markets, as it is the primary trading partner for most developing countries. We see promising growth opportunities in areas such as AI enablers, the experience economy, wellness, future mobility and education.
India and South East Asia are also key regions to monitor, with current market conditions presenting a more attractive entry point following recent declines. At the moment, just under 20% of the fund is allocated there. In Latin America, Brazil is one of our main convictions, particularly within the utilities sector, which provides access to the world’s highest real yields and a substantial equity risk premium. Around 15% of the fund is allocated to Latin America.
What was a stand-out moment from last year when running the fund?
‘Liberation Day’ on 1 April 2025 was a particularly memorable moment. On this day, the market began to recognise the Trump administration’s policies could, in fact, have a detrimental effect on the dollar. This realisation triggered a significant shift in asset allocation away from the US and into emerging markets, potentially marking the start of a robust rally for EM equities.
See also: Carmignac launches Article 9 tech fund
Can you give us an example of one of the best performing stocks on the fund last year and why?
Elite Material, a leading Taiwanese producer of copper-clad laminates for printed circuit boards, achieved a remarkable 177% increase in dollar terms last year. This outstanding performance was primarily driven by strong demand from hyperscalers and companies enabling AI technologies.
Tell us about a recent addition to the portfolio and motivation for introducing this holding.
We have recently added Tencent Music to the portfolio. As a subsidiary of Tencent, the company had come under pressure amid market concerns over potential government action against monopolistic businesses, particularly following the crackdown on Ctrip. However, we believe Tencent Music is largely insulated from regulatory risks. We took advantage of the resulting share price weakness to purchase the stock, which aligns fully with our investment process. Tencent Music itself remains a highly profitable, cash-generative business with a robust balance sheet.
During your career, what was a mistake you have learned from?
Failing to take sufficient profits after an excellent year was a mistake. It is essential to be prepared for the next market rotation and maintain a strong focus on valuations, so as to avoid significant losses when conditions change.
Lots of managers are talking about inflection points in emerging markets, what’s your take?
We anticipate that emerging markets will deliver stronger performance in 2026, not necessarily due to exceptional economic momentum within those regions, but rather as a result of pronounced weaknesses in Western economies. A crucial factor is the US dollar and currency debasement. This shift creates conditions that favour emerging markets, enabling them to deliver relatively better returns – even in the face of heightened volatility.
