Capturing Long-Term Growth in Emerging Markets: The Case for Macquarie Emerging Markets Fund

Emerging markets have long been a magnet for investors seeking high-growth opportunities, but navigating their volatility requires a disciplined, strategic approach. The Macquarie Emerging Markets Fund (DEMIX) has emerged as a standout performer in this space, leveraging its focus on high-quality, sustainable franchises in structurally growing economies. With a 15.69% average annual total return over the past three years—surpassing the MSCI Emerging Markets Index (Net) by 5.99%—the fund exemplifies how a patient, value-driven strategy can outperform benchmarks while mitigating risks inherent to emerging markets.

Strategic Positioning in Innovation-Driven Sectors

The fund's outperformance is rooted in its concentration on leading global tech and energy firms, which are pivotal to the long-term structural growth of emerging economies. As of June 30, 2025, the top ten holdings account for 68.79% of the portfolio, with heavyweights like TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD (TSMC) (17.19%) and SK SQUARE CO LTD (14.57%) dominating the mix. These companies are not just regional champions but global innovators, driving advancements in semiconductors, energy, and digital infrastructure.

For instance, TSMC's dominance in advanced chip manufacturing positions it at the forefront of the AI and 5G revolutions, while Reliance Industries (8.11% of the fund) is reshaping India's energy and retail sectors through its green energy initiatives and e-commerce platforms. By allocating capital to such firms, the fund taps into secular trends—like the global shift toward clean energy and digital transformation—that are expected to compound value over decades.

A Low-Turnover, High-Conviction Approach

The fund's low portfolio turnover rate of 14% underscores its long-term orientation. Unlike funds that chase short-term momentum, Macquarie's managers prioritize companies with durable competitive advantages and attractive valuations. This approach minimizes transaction costs and aligns with the fund's goal of capital preservation during market downturns. For example, despite a -28.66% annual return in 2022, the fund rebounded with a 17.59% gain in 2023 and a 6.51% return in 2024, demonstrating resilience amid macroeconomic headwinds.

The fund's geographic diversification further enhances its stability. South Korea (34.7%), Taiwan (19.5%), and India (12.4%) form the core of its exposure, balancing growth in tech-driven economies with energy and manufacturing hubs. This mix reduces overreliance on any single market while capturing synergies between sectors.

Skilled Management and Risk-Adjusted Returns

Liu-Er Chen, the fund's lead manager since 2006, has cultivated a track record of consistency. Under her stewardship, the fund has secured a 36th-place ranking out of 711 in its Morningstar category over three years, with even stronger results over longer horizons (14th out of 455 over 10 years). This longevity and expertise are critical in emerging markets, where local knowledge and adaptability often separate successful funds from the rest.

While the fund's beta of 1.17 indicates slightly higher volatility than its benchmark, its risk-adjusted returns remain compelling. With an annualized standard deviation of 22.25% over three years, the fund's volatility is offset by its outperformance in key periods. For instance, its 27.84% year-to-date return as of July 31, 2025, far exceeded the MSCI Emerging Markets Index's 17.51%, highlighting its ability to generate alpha even in turbulent markets.

Why This Fund Stands Out for Global Diversification

For investors seeking exposure to innovation-driven emerging markets, the Macquarie Emerging Markets Fund offers a compelling case. Its low expense ratio (1.42% net) ensures that fees do not erode returns, while its focus on sustainable franchises aligns with long-term capital appreciation. The fund's top holdings—many of which are leaders in their industries—position it to benefit from global megatrends like AI, renewable energy, and digitalization.

However, investors should consider the fund's higher volatility and ensure it aligns with their risk tolerance. Those with a 5–10 year horizon and an appetite for growth in dynamic markets may find DEMIX an attractive addition to a diversified portfolio.

In a world where emerging markets are increasingly shaping the global economy, the Macquarie Emerging Markets Fund provides a disciplined, high-conviction pathway to capitalize on their potential. By combining strategic positioning, low turnover, and a focus on innovation, it offers a blueprint for capturing long-term growth in one of the most dynamic corners of the investment universe.