Investing Insights 3 Winners and 3 Losers from Emerging-Market Funds’ Big Rally
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Jan 30, 2026 Russ Kinnel, Morningstar ratings chief and FundInvestor editor, reviews the big 2025 rally in emerging‑market funds. He breaks down which funds surged or lagged, why Asia leadership shifted, and how China, value tilts, and index choices shaped results. He also considers what the 2026 outlook means for investors and fund managers.
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Why Emerging Markets Finally Roared Back
- Emerging-market funds surged in 2025 after years of weak returns due to cheap pricing and a weaker dollar.
- A sell-America trade and fresh growth stories helped reallocate investor dollars to emerging markets.
Market Leadership Rapidly Reordered
- Leadership within emerging markets shifted as India cooled and investors rotated to China, South Korea, and Taiwan.
- Trade tensions and disappointing Indian earnings accelerated that leadership change.
Value Tilt + China Overweights Paid Off
- Funds with value tilts and overweight China outperformed when Chinese tech names rebounded.
- Overweight China and underweight India was a common trait among 2025 winners.