During the fourth quarter of 2025, the Harbor Emerging Markets Equity ETF (EPEM) demonstrated a strong performance, achieving a 7.75% return based on its net asset value, which notably exceeded its benchmark's 4.73% return. This positive outcome was primarily fueled by an enhanced global appetite for risk, which disproportionately favored market segments exhibiting clear demand and strong earnings visibility. Technology-driven sectors, particularly Information Technology, emerged as the frontrunner, benefiting from advancements in Artificial Intelligence and sustained robust demand within the semiconductor industry, including memory and foundry sectors.
Despite the overall positive trend, the quarter presented a mixed bag of returns across different investments. While companies such as ASE Technology, Taiwan Semiconductor, and Samsung Electronics contributed significantly to EPEM's outperformance, some investments faced headwinds. Baidu, for instance, experienced a reduction in its core advertising revenue as the company aggressively integrated AI-generated search results, leading to pressure on profit margins due to substantial investments in GPUs and model development. Similarly, the competitive landscape in China's electric vehicle market impacted companies like BYD, and other sector-specific pressures affected entities such as COSMAX and Tencent. Conversely, Ambev recorded a substantial 17% gain, driven by impressive operational metrics, including a 7.4% increase in unit pricing.
The overall market environment suggests a dynamic interplay of technological innovation, shifting consumer behaviors, and geopolitical factors influencing investment outcomes. As global economies continue to evolve, the ability to identify and adapt to these changes will be crucial for sustained success. Investors and fund managers alike are encouraged to remain vigilant, focusing on resilient companies that can navigate both opportunities and challenges effectively, thereby fostering long-term growth and stability in their portfolios.