Emerging markets extended their strong start to the year with another solid quarter. The Morningstar EM TME Index rose nearly 3 percent in Q2, outpacing the Morningstar Global TME Index, which gained 2.5 percent. As a result, emerging markets have now widened their outperformance over developed markets to nearly 4 percent year to date.
Several Asian countries led the way over the past three months. South Korea and Taiwan posted especially strong returns. The Morningstar Korea TME Index jumped 22 percent, driven by corporate governance reform plans and strong momentum from chipmaker and index heavyweight SK Hynix. In Taiwan, where the index climbed 16 percent, gains were mostly a rebound from a relatively weak Q1. Again, a major tech name did the heavy lifting: TSMC surged more than 22 percent and now accounts for over half the local index. Across emerging markets broadly, the technology sector led with a return of nearly 24 percent, followed by industrials (18 percent) and financials (also strong but further behind).
Against this backdrop, we examine two funds in the Morningstar Global Emerging Markets Equity category that have relatively high allocations to the tech sector. Both have received qualitative ratings from Morningstar analysts and are considered strong options within their peer group. Here, we compare JPM Emerging Markets Equity and Polar Capital Emerging Market Stars, highlighting key similarities and differences.
People
Both funds are led by experienced portfolio managers, but recent changes in lead managers and differences in team structure justify the diverging People Pillar ratings.
JPMorgan receives a High People Pillar rating, thanks to the leadership of lead manager Leon Eidelman and the depth of the Emerging Markets & Asia Pacific (EMAP) team. Eidelman is supported by veteran Austin Forrey and, more recently, John Citron, who joined after two relatively inexperienced managers departed in 2024. Still, the broader JPMorgan emerging markets group remains stable, and the EMAP team—with more than 100 analysts—remains a core strength.
Polar Capital, on the other hand, saw its People Pillar rating lowered from High to Above Average following the departure of co-manager Naomi Waistell in November 2024. Her exit was significant, given her experience and complementary role alongside lead manager Jorry Nøddekær, who continues to provide strong conviction based on his long track record in emerging markets. Nøddekær is now supported by a team of five experienced investors dedicated to this strategy.
Process
Both JPM Emerging Markets Equity and Polar Capital Emerging Market Stars use growth-oriented approaches, with a strong emphasis on fundamental research and long-term value creation. While they apply these principles differently, both funds earn an Above Average rating on the Process Pillar.
JPMorgan favors high-quality growth companies, focusing on businesses with solid business models, consistent earnings, and strong return on equity. The investment process is highly structured, leveraging the firm’s deep analyst network and a rigorous strategic classification framework that ranks stocks based on quality factors.
Polar Capital also applies a disciplined growth strategy. Its team begins by identifying sectors with long-term structural imbalances between supply and demand, then looks for companies within those sectors that generate high economic value added (EVA) relative to their cost of capital.
Portfolio
The quality-driven investment philosophies of both JPMorgan and Polar Capital result in portfolios that lean toward the growth style, especially compared to the broader category and the Morningstar EM TME benchmark. This is clearly visible in sector allocations, with both funds showing a strong overweight in technology.
JPM Emerging Markets Equity allocates over 27 percent of its nearly 70-stock portfolio to the tech sector—well above the 23 percent allocation seen in both the category average and the benchmark. Within tech, TSMC (10 percent weighting) and SK Hynix (3.6 percent) are the dominant holdings, together representing about half of the fund’s tech exposure.
Polar Capital Emerging Market Stars is even more tech-heavy, with 36 percent of its roughly 60-stock portfolio allocated to companies like TSMC (9.8 percent), Samsung Electronics (3.4 percent), SK Hynix (2.4 percent), and MediaTek (2.3 percent).
Performance
Since 2021, growth and quality stocks in emerging markets have underperformed, and that’s clearly reflected in the track records of both funds. Their growth tilt has weighed on returns relative to the category and benchmark in recent years.
That said, both funds managed to claw back some of that underperformance in the most recent quarter—largely thanks to their overweight in technology, the leading sector in Q2.
Ronald van Genderen is a senior manager research analyst at Morningstar. Morningstar evaluates mutual funds using both quantitative and qualitative research. It is part of the expert panel at Investment Officer.