Templeton Emerging Markets (TEM) is seeking shareholder approval to lift the current 12% cap on single stocks to the higher of 12% of total assets or four percentage points above a company’s weighting in TEM’s MSCI Emerging Markets index benchmark, subject to an absolute maximum of 25%. The request has been triggered by the rise in TSMC, Taiwan’s semiconductor foundry, which has soared 30.5% this year to a $1.8trn valuation on the back of extraordinary AI demand. This increased TSMC’s index weighting to 15.6% at 30 September 2026 from 6.8% in June. TEM, a £2.7bn investment trust managed by Chetan Sehgal and Andrew Ness at Franklin Templeton, had 18.2% in TSMC. It said: “The company has been overweight in TSMC throughout that period and the investment managers view it as a major contributor to the absolute and relative performance of the company.” A circular has been published and a meeting will be held in London on 1 December. TEM shares have rallied 28.5% in the past year and have generated a total return of 119.5% over three years. In June the board congratulated the managers after reporting a 41.3% return for the year to 31 March.
Matthew Read, senior analyst at QuotedData, said: “The growing concentration in markets, driven by the strong performance of stocks exposed to the AI story, is presenting a challenge for many managers whose existing restrictions make it hard to even maintain a neutral waiting in these stocks, let alone to hold an overweight position. In this instance, TSMC’s extraordinary success has seen its benchmark weighting more than double in just over three years, creating an awkward situation where TEM’s managers can retain their substantial holding but cannot add to it, even after taking profits. The proposed amendment is designed to remove this restriction while retaining some limits on concentration.
“However, there is a risk in allowing any portfolio to have such a large exposure to a single company, particularly one so closely tied to the AI investment boom and exposed to geopolitical tensions. We can see why managers, when excited by the prospects of a stock such as TSMC, will want the flexibility to be fully exposed or even overweight to it. However, those of us that are old enough to remember the dotcom boom and subsequent crash, know that escalators do not go to the sky and that there will ultimately be a significant period of adjustment. These sort of restrictions have long been viewed as good portfolio management and, putting the current excitement aside, there may well come a time where investors wish that they hadn’t allowed these guardrails to be removed.”
Temple Bar (TMPL) had a good October, outperforming the FTSE All-Share’s 1.1% rise with a 4% increase in net asset value as UK equities benefited from a broadening in global markets in response to mounting concerns over sustainability of expenditure on artificial intelligence. Shares in the £1.3bn UK equity income trust rose 3.4% taking their six-year total return since Redwheel fund managers Nicholas Purves and Ian Lance were appointed to 289%, more than double the All-Shre’s 126% advance. During October, the portfolio benefited from BT rising on its acquisition of TalkTalk and PlatformX Communications, further boosted by reports that Virgin Media O2 was nearing a deal to use its Openreach fibre network. Accenture also spiked after forecast-beating fourth quarter results and reassuring investors that the consultant’s revenue growth and margin expansion targets were not threatened by AI. Financials detracted from performance with NatWest and Standard Chartered undermined by fears of a Budget tax raid although the temporary 3 percentage point rise in the bank surcharge proved to be less than expected.
B P Marsh (BPM), a £240m venture capital fund specialising in early-stage financial services firms, said that founder Brian Marsh had sold £15.2m of shares in the company at 650p, a discount to the 720p price at the start of the week. The shares have fallen to 664p, down 7.8% or 56p today.
