Investors would be hard-pressed to find an emerging-market fund or trust that does not own a combination of Samsung Electronics, SK Hynix or TSMC – or even all three.
The surge in AI investment has bolstered the performance of the trio. TSMC, based in Taiwan, makes most of the world’s advanced chips, while South Korea’s SK Hynix and Samsung make the high-bandwidth memory that sits alongside those processors.
With the three companies making up over a quarter of the MSCI Emerging Markets index, they are almost impossible for managers to avoid.
Fidelity Emerging Markets Limited (FEML), co-managed by Chris Tennant and Nick Price, is no exception. As of the end of September 2026, it held 17.6% of net assets in TSMC, 11.8% in Samsung and 8.6% in SK Hynix.
However, Tennant argues that the trust’s structure, which allows gearing and short positions, helps to manage that concentration.
He said he would “never invest in a company just because it is in the benchmark or lots of competitors own it”, arguing that the trust holds all three above because of his fundamental outlook for them.
TSMC, in particular, is “the highest-quality company that has ever existed in our investment universe, with an incredible competitive moat and pricing power”, Tennant said.
“But the good thing about the FEML trust is that we can use gearing and keep our active money quite high, even though we do have these holdings,” Tennant said.
“That extension of the long book means we can populate the fund with a bunch of small- and mid-cap technology stocks, where we think the risk-reward is even more attractive than Samsung, SK Hynix and TSMC.”
As of the end of September 2026, the trust’s gross market exposure was 166.8% of total net assets, while net equity exposure was 107.7%.
Below, Tennant sets out the trust’s process, his best and worst calls and the current outlook for emerging markets.
What is your process?
We take a quality approach, as we look to invest in companies we believe can generate enduring higher returns than any of their competitors or their own cost of capital. This means there needs to be an identifiable competitive advantage around the company.
It is an all-cap strategy and we will go right the way down the spectrum as that is where we see a lot of inefficiencies in emerging markets.
One of the core ways we are differentiated from other trusts is that we will extend our long book from 100% to 130%, and against that we have an around 30% short book. So while the net exposure within the investment trust is like a traditional trust, the gross exposure is around 160%, which means we have very high active money – around 125%.
How do you choose your short positions?
First, a business needs to be in fundamental decline, either structurally or cyclically.
Second, we look for red flags around the company. These can be around accounting – it might be committing fraud. Maybe it has too much debt or is hiding debt off the balance sheet. It could be a regulatory red flag.
When we see a business that’s in fundamental decline, and there are other red flags around it, we will look to have a short position.
We also try to make sure that the short book complements the long book – so the perfect situation is when we find an industry and there is one company driving a competitor into bankruptcy, and we can own both the winning company and benefit from shorting the losing company as well.
We will never short a company purely on valuation.
The short book has generally underperformed by more than 10% per annum in recent years and so it’s been a very strong driver of performance and one of the main reasons why FEML has performed so strongly.
Why do you think emerging markets are a good place for a long-short approach?
From a shorting perspective, emerging markets are much less efficient because there isn’t such a dominant hedge fund community – most of the money invested is in ETFs [exchange-traded funds] or long-only funds. It takes longer for the market to identify some of these fraudulent businesses.
There are also much more varied standards of corporate governance – lots of companies have the chairman and chief executive officer as the same person, for example.
An example of a closed short position we previously had was Lojas Americanas, an e-commerce company in Brazil. It was being squeezed by competition not just from Mercado Libre but also from Amazon entering its territory as well. The company resorted to fraud to make sure its results didn’t appear to be deteriorating as much as they were by hiding debt.
What have been your best and worst calls?
We have made one major mistake since running the trust and that is the overweight position we had in Russia ahead of the conflict with Ukraine in 2022, as we concluded there wouldn’t be a full-scale conflict.
This was compounded by the fact that we got a lot of our oil exposure from Russia and didn’t have investments in [other oil producers], such as Brazil or the Middle East.
The trust made a 24.1% loss versus a 10% for the benchmark in 2022. The largest detractors included Sberbank and TCS Group, with these positions subsequently marked to zero.
In more recent times, one of our best calls is Elite Material, a supplier of copper clad laminate which is used in AI data centres.
Not only is the company benefiting on the volume side from more data centre investment, but higher demand means it has a massive price mix uplift as well and extremely strong pricing power. It’s been a phenomenal investment over the recent years.
From 1 June 2025 to 30 Sept 2026, Elite Material added 692bps of relative performance. This period also reflects the holding period for the stock.
What is your outlook for emerging markets and where are your biggest concerns?
If you strip out technology from the emerging market benchmark, earnings growth has still been incredibly strong in emerging markets across financials, commodities, mining and energy – so it’s not just tech doing well, although it has been an enormous tailwind.
Yet there hasn’t been any re-rating in the valuations; emerging markets are still at multi-decade discounts compared to developed markets.
There is also the fiscal environment to consider. In some developed markets, we’re seeing unsustainable levels of spending and fiscal deficit.
That’s been the case since Covid, when economies were locked down and developed markets had the luxury of extending fiscal subsidies. Emerging markets couldn’t do that, and so the relative fiscal position of emerging markets is as strong as it’s ever been.
From a monetary perspective, emerging market central banks have been well ahead of the curve in hiking rates when we had inflation post-Covid.
We do have pockets of concern around some of the domestic economies in places like China and India.
In China, you have a collapsing population size, a property market that is still in a difficult situation and fiercely competitive domestic industries. And then in India, we have concerns around the IT services sector and what AI means for jobs.
What do you do outside of fund management?
I have two young children – so that takes up a lot of my time! – and then I also like running and cycling.