The MSCI Emerging Markets index returned 26.8% in the first half of 2026, more than double the 10% from the S&P 500 and well ahead of the Nasdaq's 13.1%.
For most of the past decade, the safest bet in global equities was simply to buy America but the first six months of this year overturned that.
For Rob Morgan, chief analyst at Charles Stanley, it's “the AI trade gone global”.
“That's the key takeaway,” he said. “In previous periods we've seen it more concentrated in the US technology sector. Now it’s a different type of concentration.”
Where the money was made
FE Analytics data shows the technology and Asia sectors are at the top of both the Investment Association and Association of Investment Companies universes over the six months to the end of June, as shown in the table below.
| Top fund and trust sectors in the first half of 2026 | |
| Sector | Return |
| IT Technology & Technology Innovation | 33.6% |
| IT Asia Pacific | 30.1% |
| IA Technology & Technology Innovation | 28.2% |
| IT Asia Pacific Equity Income | 28.0% |
| IA Asia Pacific Excluding Japan | 26.4% |
| IA Global Emerging Markets | 25.1% |
| IA North American Smaller Companies | 23.4% |
| IT Global Emerging Markets | 23.2% |
| IA Asia Pacific Including Japan | 20.2% |
| IT Infrastructure Securities | 19.7% |
| IT Japan | 19.6% |
| IT Global Smaller Companies | 18.6% |
| IT Financials & Financial Innovation | 17.8% |
| IA Japan | 17.6% |
| IT Environmental | 17.4% |
| IT North American Smaller Companies | 13.9% |
| IT Infrastructure | 13.4% |
| IT Property - UK Healthcare | 12.7% |
| IA Infrastructure | 12.5% |
| IT Insurance & Reinsurance Strategies | 11.6% |
| IA Commodity/Natural Resources | 11.3% |
| IA Specialist | 11.2% |
| IT Growth Capital | 11.0% |
| IA Latin America | 10.7% |
| IT Biotechnology & Healthcare | 10.6% |
| IA North America | 10.5% |
| IA Global | 9.9% |
| IA Global Equity Income | 9.9% |
| IT Commodities & Natural Resources | 9.6% |
| IA Property Other | 9.6% |
Source: FinXL
Among single strategies, this trend was seen with Amundi MSCI Semiconductors returning 70.9% over the six months, coming in as the eighth best vehicle in the year-half, sandwiched underneath two layers of Korean equity funds.
Trackers of Taiwan, home to TSMC, gained close to 70%, while Korea trackers, holding Samsung Electronics and SK Hynix, returned around 104%, as shown below.
| Top funds and trusts in the first half of 2026 | |||
| Fund | Sector | Return ytd | |
| Franklin FTSE Korea UCITS ETF | IA Specialist | 110.9% | |
| Barings Korea Trust | IA Specialist | 105.4% | |
| HSBC MSCI Korea Capped UCITS ETF | IA Specialist | 104.4% | |
| iShares MSCI Korea UCITS ETF Inc | IA Specialist | 103.8% | |
| Xtrackers MSCI Korea UCITS ETF | IA Specialist | 103.6% | |
| JPM Korea Equity Fund | IA Specialist | 78.7% | |
| Polar Capital Global Technology | IA Technology & Technology Innovation | 74.7% | |
| Amundi MSCI Semiconductors | IA Technology & Technology Innovation | 70.9% | |
| Polar Capital Smart Energy | IA Specialist | 70.6% | |
| Xtrackers MSCI Taiwan UCITS ETF | IA Specialist | 69.9% | |
| Franklin FTSE Taiwan UCITS ETF | IA Specialist | 69.9% | |
| iShares MSCI Taiwan UCITS ETF | IA Specialist | 69.8% | |
| HSBC MSCI Taiwan Capped UCITS ETF | IA Specialist | 69.7% | |
| Nomura Emerging Markets | IA Global Emerging Markets | 66.2% | |
| Baker Steel Resources Trust | IT Commodities & Natural Resources | 65.2% | |
Source: FinXL
As Morgan noted, the market was driven by a small number of Asian semiconductor names.
“Korea, through Samsung and SK Hynix, would have done really well, with some explosive returns over the past six months in those semiconductor names. Those already very large companies have dominated index returns in those Asian markets,” he said.
The broadening-out of the AI trade didn’t distribute evenly at global level. “You've got the specialists in Korea and Taiwan that really dominate that AI-related supply of the hardware that's required, and they've seen hugely strong earnings momentum off the back of it. Far from broad-based”, he noted.
Stripping China out of the emerging markets index shows how concentrated the effect was: the HSBC MSCI Emerging Markets ex China Equity Index tracker made 42.1%, against 26.5% for the broader HSBC MSCI Emerging Markets tracker.
Asian indices, Morgan said, are now even more concentrated in a handful of names than the US market is in its Magnificent Seven. Investors buying a Pacific or Asia-specific tracker, he suggested, should “be aware they are taking on more stock-specific risk than the label implies”.
Rotation within the US
The US sectors have been more pedestrian, with a rotation into smaller companies. The IA North American Smaller Companies returned 23.4% against 10.5% for the broader IA North America sector.
Within single names, value strategies also outpaced the giants: iShares Edge MSCI USA Value Factor UCITS ETF returned 49.7%, while Amundi MSCI USA Mega Cap UCITS ETF made a more modest 11.3%.
Meanwhile, some of the best-known concentrated US growth funds fell, with WS Lindsell Train North American Equity losing 12.0% and Baillie Gifford American losing 4.6%.
Morgan saw a domestic economic story behind the small-cap strength as much as a rotation away from growth.
“US small companies have actually done pretty well over the period, with some good economic news in the US more generally. But for the most part it's been hugely concentrated in just a handful of very large, very specific names.”
The middle ground
European and UK smaller companies delivered returns that were unremarkable next to Asia and tech, but solid on their own terms. IT European Smaller Companies returned 8.3% over the half.
“An 8% return from European small companies over six months is really good, actually,” Morgan said.
As for the UK, the picture “is a bit more difficult”.
“We lack many large industrial technology names and there are a few names that do quite well in the UK, but for the most part it's quite a domestic index – and we've seen the political issues mount, which hasn't done it any favours,” he continued. “There's definitely some value there, but not really any particular short-term catalyst to unlock it.”
Looking at last month’s data, however, Ben Yearsley, director at Fairview Investing, pointed to one rare bright spot: UK funds recorded their first net inflows since 2016.
The laggards
At the bottom of the table sat India, China and private equity, as the table below shows.
| Bottom funds and trusts in the first half of 2026 | |||
| Fund | Sector | Return ytd | |
| HOME REIT PLC | IT Property - UK Residential | -74.9% | |
| Aquila European Renewables PLC | IT Renewable Energy Infrastructure | -52.4% | |
| Sure Ventures Plc | IT Technology & Technology Innovation | -50.0% | |
| British & American Investment Trust PLC | IT Global Equity Income | -44.8% | |
| HSBC MSCI Indonesia UCITS ETF | IA Specialist | -40.9% | |
| Chrysalis Investment Limited | IT Growth Capital | -35.2% | |
| SDCL Efficiency Income Trust PLC | IT Renewable Energy Infrastructure | -32.3% | |
| Partners Group Private Equity Limited | IT Private Equity | -30.5% | |
| Schroder Ground Rents Income Plc | IT Property - UK Residential | -28.1% | |
| VPC Specialty Lending Investments PLC | IT Debt - Direct Lending | -27.6% | |
| HgCapital Trust plc | IT Private Equity | -25.4% | |
| First Trust Dow Jones International Internet UCITS ETF | IA Specialist | -24.7% | |
| 3i Group Plc | IT Private Equity | -23.8% | |
| abrdn European Logistics Income PLC | IT Property - Europe | -23.6% | |
| Pershing Square Holdings Ltd | IT North America | -23.0% | |
Source: FinXL
For Morgan, India “got ahead of itself, which sometimes it does,” in the period up to 2026, when it had a good run. China, however, is “a little bit more structurally problematic”.
“Consumer spending just hasn't come through,” he said. “A lot of the internet names are doing very badly and there's still the property bubble unwinding. It's been a really difficult place to be. It's only six months, it's probably only a small dip in relation to the bigger picture.”
What to watch into the second half of the year
Two threads stood out to Morgan as he looked ahead to the second half. The first is fixed income: “There's finally some positive returns for bonds, which is probably worth noting.”
The second is healthcare, and specifically biotech, which he described as coming through almost unnoticed after years out of favour.
“Healthcare and biotech has been pedestrian for the last three to five years, but it's now starting to do more, with more certainty around the regulatory situation in the US,” he said.
June data supports the point: Pictet Biotech returned 14.4% for the month, the wider healthcare and biotechnology sector averaged 8.8% and the Biotech Growth trust made 20.6%.