Are Investors Underestimating Emerging Markets?

The MSCI Emerging Markets Index jumped roughly 30 % last year, its strongest gain in a decade, as investors fled over‑valued U.S. equities, chased a weaker dollar and seized historically low EM valuations. That influx was amplified by the Trump‑era shift toward diversification and higher‑yield opportunities. Today, the market faces a new set of challenges: a supply shock from the Strait of Hormuz has tightened energy imports for India, Indonesia and Vietnam, pushing prices higher and feeding inflation across the region. The resulting cost pressure mirrors earlier commodity spikes but adds a geopolitical layer that could linger.

Charles Gillings’ Utilico Emerging Markets Trust illustrates how a sector‑focused, bottom‑up approach can outpace broad benchmarks. Since its 20‑year inception the fund has delivered a 550 % cumulative return versus the MSCI’s 400 % and posted a 26 % gain in the most recent twelve months, despite the current headwinds. Rather than betting on a single country, the trust targets infrastructure, utilities and digital assets—ports, toll roads, power generation, water treatment and data centres—that underpin urbanisation, the energy transition and modern logistics. These assets typically enjoy long‑term contracts, inflation‑linked tariffs and regulatory support, providing stable cash flows even when macro conditions wobble.

Brazil emerges as the trust’s largest holding, benefitting from a commodity‑rich economy, falling interest rates and a maturing hydro‑dominant power sector that could rank it among the world’s top five energy exporters within a decade. The country’s infrastructure pipeline—ports, rail and renewable projects—matches the fund’s megatrend thesis and offers inflation‑linked concessions that cushion political cycles. In the Philippines, a youthful, half‑urbanised population drives demand for water, ports and digital wallets, while government energy‑saving measures mitigate short‑term supply shocks. Together these markets illustrate how targeted infrastructure exposure can capture growth, diversify supply chains and hedge against the volatility that often sidelines broader emerging‑market indices.