Templeton Emerging Markets (TEM) has congratulated fund managers Chetan Sehgal and Andrew Ness after the Franklin Templeton pair delivered a 41.3% total investment return for the year to 31 March.

The “unusually strong” underlying performance saw the Asia-weighted portfolio recover from the shock of US President Trump’s tariffs in April last year to beat the 26.8% gain in the MSCI Emerging Markets.

Shareholders in the £3.2bn investment trust did even better with a 48.6% total return as sustained share buybacks by the board narrowed the discount between the share price and the value of TEM’s investments to 8.2% from 12.4%.

Chair Angus Macpherson cautioned that emerging markets should be treated as a long-term investment and not too much emphasis should be placed on the one-year rebound, which followed a more modest 8.8% increase in the previous 12 months.

Over five and ten years, TEM has generated underlying investment returns of 38.2% and 220.3% respectively, highlighting the difficult four-year period from early 2021, but nevertheless, both beating the benchmark which returned 12.8% and 89.3%.  

At this rate, the company is on track to avoid buying back up to a quarter of its shares in 2029. It will only undertake a 25% tender offer if performance falls behind the MSCI index in the five years to March 2029.

Our view

QuotedData senior analyst Matthew Read said: “These are a great set of results from Templeton Emerging Markets and it’s not surprising given that TEM was well positioned for the AI-related rally with its holdings in companies like SK Hynix, TSMC and Samsung Electronics.

“TEM’s board deserves credit for keeping the pressure up on discount narrowing, with £166.7m spent on buybacks during the year and a new commitment to repurchase up to £300m of shares over the next 12 to 24 months. That said, the chairman is right that buybacks alone will not solve the issue. Sustained performance, improved sentiment towards emerging markets and better awareness of TEM’s long-term record are all needed.

“The wider backdrop for emerging markets remains complicated, with tariffs, US-China tensions, conflict in the Middle East and oil-price volatility all relevant risks. However, the results are a reminder that emerging markets are not a single trade. TEM’s managers have been selective and have found strong structural growth opportunities in areas such as AI supply chains, semiconductors, corporate reform in Korea and attractively valued Brazil. After a year like this, investors should not extrapolate in a straight line, but these results illustrate why emerging markets deserve a place in investors’ portfolios.”

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