The Polen Capital Emerging Markets Growth Composite Portfolio demonstrated notable performance in the second quarter of 2025, surpassing the MSCI Emerging Markets Index. This achievement was predominantly driven by effective stock picking rather than country or sector allocation. Key markets such as Taiwan, South Korea, and China fueled positive returns for the broader emerging market equities, with Taiwan's semiconductor industry rebounding strongly post-earthquake and amidst easing tariff concerns. South Korea's impressive growth, exceeding 30%, was supported by robust export demand and investor optimism for shareholder-friendly reforms, aiming to reduce the long-standing 'Korea discount.' Conversely, Saudi Arabia's market faced headwinds due to declining energy prices and heightened geopolitical tensions in the Middle East.
Within the portfolio, specific security selections significantly contributed to its relative outperformance. Tencent Music Entertainment and dLocal emerged as top performers, with Tencent Music showing promising growth in its online music operations and dLocal showcasing improved financial results and initiating its first dividend. These successes were achieved despite challenges in the Consumer Discretionary sector, particularly in China, which experienced increased competitive pressures. The portfolio strategically reduced exposure to Chinese consumer technology companies, reallocating capital towards manufacturing industries with strong structural growth. This move capitalized on the global competitiveness of Chinese producers, extending beyond traditional emerging markets to developed stages.
Looking ahead, Polen Capital maintains a positive long-term view on emerging markets. The increasing urbanization across these regions is expected to drive economic output, raise income levels, and foster wealth creation for a significant portion of the global population. Furthermore, many emerging economies have adopted more sound economic policies, leading to healthier financial positions compared to some developed nations, which enhances their resilience against global economic uncertainties. The current valuation of emerging markets and the MSCI Index, trading at a discount relative to developed counterparts, suggests an attractive entry point for investors. This outlook is reinforced by the belief that high-quality growth businesses in these markets, characterized by strong competitive advantages and robust balance sheets, will continue to deliver superior long-term returns, benefiting clients who seek above-average performance.
In a world constantly reshaped by geopolitical shifts and economic complexities, maintaining a clear vision and a commitment to fundamental value becomes paramount. The demonstrated success in identifying resilient, high-quality enterprises within emerging markets not only underlines strategic foresight but also reinforces the enduring principle that diligent research and disciplined investment can yield prosperity even amidst volatility. This proactive approach to reallocate capital towards sectors with inherent structural advantages and away from areas facing heightened competition exemplifies adaptability and a forward-thinking mindset. Such a strategy not only aims for financial growth but also implicitly supports global economic diversification, fostering a more balanced and robust international financial ecosystem. It's a testament to how sound financial stewardship, guided by optimism and a deep understanding of market dynamics, can illuminate pathways to success and foster economic well-being for all.