Seizing Emerging Markets' Next Chapter: Artisan's Proven Strategy for 2025 and Beyond

The global economy is at a crossroads. Policy uncertainty, shifting trade dynamics, and the uneven recovery of emerging markets (EM) have left many investors hesitant. Yet within this complexity lies a compelling opportunity: Artisan Partners’ Developing World Strategy, which has consistently outperformed its peers over the past decade. With a 10-year annualized return of 9.61% (vs. the MSCI Emerging Markets Index’s 3.87%), this strategy is primed to capitalize on underappreciated growth drivers in 2025. Now is the time to act.

A Decade of Discipline: The Power of “Consumption Convergence”

Artisan’s success hinges on its “Consumption Convergence” thesis, which identifies emerging economies where domestic demand is driving sustainable growth. Unlike traditional EM plays focused on export-driven sectors, this strategy targets scalable, domestically oriented businesses—so-called “passport companies” that adapt global innovations to local needs. Over the past decade, this approach has delivered 5.74 percentage points of annualized outperformance against the MSCI EM Index, as of June 2024.

The key to this consistency is adaptive asset allocation. Artisan’s team dynamically adjusts exposure to regions and sectors based on valuations, policy shifts, and macro trends. For instance, their reduced India exposure in 2024 avoided the 11.3% decline seen in Indian equities, while allocations to Brazil and China (up 14.5% and 19.1%, respectively) capitalized on underpenetrated consumer markets.

Navigating Volatility with the Flexion Tool

No strategy is immune to market turbulence, but Artisan’s Flexion risk management framework ensures resilience. By quantifying “capital at risk” during periods of low reinvestment opportunities, Flexion allows the team to preserve gains in volatile environments. This discipline was evident in 2023, when the fund’s 3-year return of -9.31% contrasted sharply with broader EM declines, reflecting proactive risk reduction.

In 2025, this framework is critical as policy uncertainty looms. Central banks in EM are balancing inflation pressures with growth needs, while trade tensions complicate supply chains. Artisan’s ability to rebalance quickly—whether shifting toward Southeast Asian fintech or underweighting overvalued sectors—positions investors to thrive amid volatility.

The Catalyst: Global Special Situations and Mispriced Assets

Artisan’s recent launch of the Global Special Situations strategy amplifies its edge. This sub-strategy targets mispriced assets in EM economies, particularly in China’s tech sector and Latin American credit markets. For example, holdings in Sea Ltd (5.76% of the portfolio) and MercadoLibre (5.17%) reflect bets on digital ecosystems that serve underbanked populations—a theme underscored by rising credit access in regions like Brazil and India.

Why Act Now?

The current juncture offers a rare confluence of factors:
1. Valuation discounts: EM equities trade at a 25% discount to historical averages, despite improving earnings momentum.
2. Policy tailwinds: EM central banks have room to ease rates if growth falters, unlike their developed-market peers.
3. Structural shifts: Urbanization in Southeast Asia and digitization in Africa are creating population clusters with rising disposable income.

Artisan’s 2025 Q1 performance—7.46% YTD—already reflects this thesis. With reduced U.S. equity exposure (35.98% of assets) and a focus on EM winners, the fund is poised to outperform peers as these trends materialize.

Final Call: Allocate Now, but Do It Selectively

Investors should allocate 3–5% of their global equity portfolio to Artisan’s EM-focused funds (e.g., ARTYX) to capture this convergence. The Morningstar 3-star rating and trailing 1-year outperformance of +16.7% vs. the EM benchmark reinforce its credibility.

But tread carefully: Avoid passive EM ETFs, which still overexpose to underperforming sectors like energy and materials. Instead, let Artisan’s active, disciplined approach navigate you to the next chapter of EM growth.

The window for buying mispriced EM assets is narrowing. Act swiftly—before the market catches up.