The Wasatch Emerging Markets Select Fund's investor class recorded an 18.37% total return in the second quarter, falling behind its benchmark. Despite this, the fund’s strategic underweighting in China proved advantageous, helping to mitigate broader market downturns, and its existing holdings demonstrated stronger performance. This period was marked by an easing of tensions between the U.S. and Iran, alongside renewed optimism for global stability, which generally buoyed emerging market equities. The MSCI Emerging Markets Index saw a significant 24.05% increase, largely fueled by gains in Korean and Taiwanese sectors.
A notable factor contributing positively to the Fund's performance was the strong showing of several Taiwanese companies. These firms continued to thrive from the expanding global artificial intelligence infrastructure, driven by major hyperscalers. Conversely, Brazilian stocks, including Inter & Co., Inc., Weg Sa, and NU Holdings Ltd., emerged as the primary detractors from the fund's overall performance during this quarter, reflecting specific regional challenges or sector-specific headwinds. The fund’s significant underweighting in Korean memory-related stocks, while a source of underperformance due to their outsized gains in the benchmark, aligned with a strategy focused on less cyclical semiconductor value chain opportunities.
Looking ahead, the fund is actively seeking high-quality, less cyclical companies within the Korean semiconductor value chain, favoring durable growth prospects over momentum-driven, late-cycle memory investments. This selective approach reflects a commitment to identifying robust long-term opportunities while managing exposure to volatile segments. The sustained strength in Indian markets, buoyed by improved macroeconomic conditions and a supportive political environment, further validates the fund’s strategic diversification and its ability to capitalize on favorable regional dynamics. Such an investment philosophy, grounded in rigorous analysis and adaptive positioning, aims to deliver sustained value by discerning genuine growth engines amidst evolving global landscapes.
By maintaining a disciplined focus on fundamentally strong companies and adapting to macroeconomic shifts, investors can navigate the complexities of emerging markets. This proactive management, coupled with a commitment to identifying innovative and resilient businesses, offers a pathway to long-term success, fostering stability and growth in a dynamic global economy.
