The Artisan Developing World Fund, a mutual fund focused on emerging markets, reported a strong quarter with a 9.64% return, outperforming the MSCI Emerging Markets Index’s 8.72% gain. Since its inception in 2015, the fund has delivered an impressive 149.38% cumulative return, significantly beating the index’s 50.92% gain.
The quarter saw a significant shift in market sentiment, driven by the US Federal Reserve’s 50bps interest rate cut and China’s surprise monetary policy easing. Emerging markets responded positively, with the MSCI Emerging Markets Currency Index rising 4.02% and local equity markets also posting gains. China was a notable beneficiary, with the MSCI China Index surging 23.49% and the renminbi appreciating 3.44%. Southeast Asian markets also performed well, with Thailand, Philippines, Malaysia, and Indonesia all posting significant gains.
The fund’s top contributors included Meituan, a Chinese online local services platform, Sea, a Southeast Asian e-commerce leader, and MercadoLibre, a Latin American marketplace. These companies demonstrated strong profit growth, improved competitive environments, and robust domestic demand.
On the other hand, the fund’s bottom contributors included Crowdstrike, a cybersecurity technology company, Airbnb, a global online travel marketplace, and ASML, a Dutch semiconductor equipment producer. These companies faced challenges such as system updates, weaker outlooks, and export restrictions.
China’s policy pivot, which included rate cuts, liquidity injections, and stock market support mechanisms, was a surprise to market participants. The government’s focus on stemming the housing market decline and improving private capital formation is a welcome step, but the quantum, timing, and implementation of fiscal programs remain uncertain.
The fund remains focused on companies with high revenue velocity and attractive incremental margin structures that are favorably exposed to domestic demand. Emerging markets are generally perceived as beneficiaries of easier monetary policy, but the fund emphasizes the importance of capital formation, domestic policy reform, and sustained growth in the middle class.
The fund’s investment approach prioritizes value capture, reinvestment into defensive businesses, and creation of new pathways for value creation. This approach has enabled the fund to achieve disproportionate equity outcomes and establish permanence in successful investments.
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