Carlos Hardenberg joins Jonathan Davis, host of the Money Makers Podcast and editor of the Investment Trusts Handbook (winner of the AIC Best Broadcast Journalist You Award 2024 and 2025), to discuss – amongst other things – the ongoing impact of the Iran War on financial markets and the investment trusts sector.
You can listen to the episode on Apple Podcasts, Spotify, Amazon Music and Soundcloud.
On 10 March 2026, MCP Emerging Markets hosted a Zoom webinar where founding partner Carlos Hardenberg and investment analyst Swati Mehta provided an update on the strategy, performance and portfolio of the Mobius Emerging Markets Fund (MEMF) and the Mobius Investment Trust (MMIT), as well as providing an in-depth review of their insights from a recent research trip to India.
The video below is a replay of the webinar.
Please email Anna von Hahn at anna@mcp-em.com should you have any questions or would like further information.
For professional investors only. Capital at risk.
MCP wishes everyone a prosperous Chinese New Year as we are now over a week into the Year of the Fire Horse, a “Double Fire” combination symbolising energy and volatility.
In markets, “fire” could either symbolise a continuation of last year’s blistering rally or a crash and burn. Reflecting on China’s performance last year, the market appeared driven more by sentiment and liquidity injections than by earnings growth or fundamental re-ratings. The Fire Horse also symbolises independence, a theme likely to remain central to China’s strategic direction, particularly in the technology sector amid increased geopolitical tensions with the US.
The last year of the Fire Horse in 1966 stands as one of the most volatile, defining, and ultimately tragic periods in China’s modern history, marked by the beginning of the Cultural Revolution. The movement was launched by Chinese Communist Party Chairman Mao Zedong, with the stated goal to preserve communism and purge those “who have followed the path of capitalism”. Beyond the profound human tragedy, with an estimated 2 million lives lost, the revolution caused a severe economic contraction as industrial production, agriculture, and the education system were all majorly disrupted by the social and political turmoil.
China has since undergone extraordinary transformation becoming the world’s second-largest economy and home to some of the largest capital markets, such as the Shanghai Stock Exchange, only opening in 1990.
As we enter the Year of the Fire Horse, 2026 reflects the continued structural rebalancing of China’s growth drivers. GDP growth is projected at around 4.5%, with export momentum moderating and the property sector remaining a drag, albeit a diminishing one. Domestic activity is expected to remain broadly resilient, supported by measured policy actions and ongoing expansion in innovation-driven sectors. At the same time, uncertainties surrounding trade and technology policies, the trajectory of the property adjustment, and global macro conditions may contribute to continued market volatility. In this environment, a disciplined and selective approach remains warranted.
Carlos Hardenberg features on AJ Bell’s Money and Markets Podcast. Carlos speaks about dealing with political turmoil in emerging markets, and how he safeguards investments from it.
Listen on Spotify, Apple Podcasts, and YouTube Music
In contrast to previous years, when MEMF delivered strong returns driven by small- and mid-cap emerging market companies despite broader EM equities lagging, the asset class entered a recovery phase in 2025. Emerging markets demonstrated to global investors that they can deliver strong returns in a market previously dominated by American exceptionalism.
However, the benefits were largely captured by a small number of mega-cap stocks, resulting in unusually narrow market leadership. While gains have been highly concentrated so far, a broader set of supportive dynamics for emerging markets should increasingly extend beyond the largest stocks and benefit quality small- and mid-cap companies.
At the same time, many of our holdings have continued to execute well operationally, but this has not been fully reflected in share prices due to macroeconomic headwinds. As these pressures ease, we see scope for a catch-up in valuations, providing support to the portfolio in the years ahead.
At year end, emerging markets were trading at a 38% discount on a P/E basis and a 60% discount on a P/B basis relative to developed markets. These valuation gaps are particularly pronounced in the sectors we focus on, such as technology and consumer discretionary. Importantly, the attractive discounts noted above are also increasingly evident across quality stocks, extending beyond traditional value segments.
Furthermore, emerging markets are supported by a 9.4% weakening of the US dollar in 2025, which is expected to continue into 2026. This typically benefits EM currencies, with the Brazilian real, Colombian peso and Taiwanese dollar among the strongest performers this year. Emerging markets continue to maintain healthier debt levels than developed markets (69% versus 109% of GDP in 2024), while simultaneously offering stronger GDP and earnings growth projections.
Political risk related to elections is lower this year, with major electoral events in 2026 limited to Vietnam and Brazil across our key markets. However, geopolitical risks more broadly remain elevated. Recent developments, including tensions between the US and Europe over Greenland and events in Venezuela, have already added complications to the outlook for 2026, alongside long-standing risks such as the Russia–Ukraine conflict, instability in the Middle East, global trade wars, and ongoing tension between China and Taiwan. We remain highly mindful of geopolitical risks and always apply a macro risk overlay to our bottom-up stock selection.
The Federal Reserve’s expected rate cuts this year further enhance the outlook, as lower US yields generally push investors toward higher-return emerging market assets—particularly as many EMs benefit from moderating inflation and higher real rates themselves. While effects may vary across countries, the global easing cycle provides a broadly supportive backdrop for EM performance.
Furthermore, a number of country-specific tailwinds should support our portfolio exposures. Taiwan continues to benefit from a powerful semiconductor investment cycle and a globally competitive innovation ecosystem. South Korea is advancing structurally in high-end manufacturing, materials and automation, where we continue to find globally competitive businesses trading at attractive valuations.
Taiwan and Korea Well Positioned in Semiconductor and AI Markets
Despite a challenging start to 2026, marked by foreign outflows amid reduced risk appetite and heightened macro volatility following recent geopolitical developments, India’s longer-term outlook remains compelling. We continue to look through near-term volatility, supported by resilient GDP growth, rising discretionary consumption and improving capital expenditure trends. The year 2026 could turn into another period of significant progress for the country.
Brazil offers selective opportunities as inflation moderates, interest rates decline and corporate balance sheets strengthen. We remain cautious around the upcoming elections, which are likely to introduce additional volatility in 2026.
While emerging markets have delivered strong headline returns this year, dispersion beneath the surface has been significant. With valuation spreads at elevated levels and earnings revisions diverging meaningfully by country, sector and company, passive exposure increasingly reflects index concentration rather than the breadth of opportunity available.
In this environment, disciplined bottom-up stock selection is essential to identifying structurally stronger businesses beyond benchmark heavyweights. We believe the portfolio is well positioned should the recovery broaden into under-owned areas of the market where fundamentals remain intact.
With a portfolio built around high-quality, lesser-known companies and a disciplined, active approach to capital allocation, we remain fully committed to our investment philosophy and to delivering long-term performance and shareholder value.
In contrast to previous years, when MMIT delivered strong returns driven by small- and mid-cap emerging market companies despite broader EM equities lagging, the asset class entered a recovery phase in 2025. Emerging markets demonstrated to global investors that they can deliver strong returns in a market previously dominated by American exceptionalism.
However, the benefits were largely captured by a small number of mega-cap stocks, resulting in unusually narrow market leadership. While gains have been highly concentrated so far, a broader set of supportive dynamics for emerging markets should increasingly extend beyond the largest stocks and benefit quality small- and mid-cap companies.
At the same time, many of our holdings have continued to execute well operationally, but this has not been fully reflected in share prices due to macroeconomic headwinds. As these pressures ease, we see scope for a catch-up in valuations, providing support to the portfolio in the years ahead.
At year end, emerging markets were trading at a 38% discount on a P/E basis and a 60% discount on a P/B basis relative to developed markets. These valuation gaps are particularly pronounced in the sectors we focus on, such as technology and consumer discretionary. Importantly, the attractive discounts noted above are also increasingly evident across quality stocks, extending beyond traditional value segments.
Furthermore, emerging markets are supported by a 9.4% weakening of the US dollar in 2025, which is expected to continue into 2026. This typically benefits EM currencies, with the Brazilian real, Colombian peso and Taiwanese dollar among the strongest performers this year. Emerging markets continue to maintain healthier debt levels than developed markets (69% versus 109% of GDP in 2024), while simultaneously offering stronger GDP and earnings growth projections.
Political risk related to elections is lower this year, with major electoral events in 2026 limited to Vietnam and Brazil across our key markets. However, geopolitical risks more broadly remain elevated. Recent developments, including tensions between the US and Europe over Greenland and events in Venezuela, have already added complications to the outlook for 2026, alongside long-standing risks such as the Russia–Ukraine conflict, instability in the Middle East, global trade wars, and ongoing tension between China and Taiwan. We remain highly mindful of geopolitical risks and always apply a macro risk overlay to our bottom-up stock selection.
The Federal Reserve’s expected rate cuts this year further enhance the outlook, as lower US yields generally push investors toward higher-return emerging market assets—particularly as many EMs benefit from moderating inflation and higher real rates themselves. While effects may vary across countries, the global easing cycle provides a broadly supportive backdrop for EM performance.
Furthermore, a number of country-specific tailwinds should support our portfolio exposures. Taiwan continues to benefit from a powerful semiconductor investment cycle and a globally competitive innovation ecosystem. South Korea is advancing structurally in high-end manufacturing, materials and automation, where we continue to find globally competitive businesses trading at attractive valuations.
Taiwan and Korea Well Positioned in Semiconductor and AI Markets
Despite a challenging start to 2026, marked by foreign outflows amid reduced risk appetite and heightened macro volatility following recent geopolitical developments, India’s longer-term outlook remains compelling. We continue to look through near-term volatility, supported by resilient GDP growth, rising discretionary consumption and improving capital expenditure trends. The year 2026 could turn into another period of significant progress for the country.
Brazil offers selective opportunities as inflation moderates, interest rates decline and corporate balance sheets strengthen. We remain cautious around the upcoming elections, which are likely to introduce additional volatility in 2026.
While emerging markets have delivered strong headline returns this year, dispersion beneath the surface has been significant. With valuation spreads at elevated levels and earnings revisions diverging meaningfully by country, sector and company, passive exposure increasingly reflects index concentration rather than the breadth of opportunity available.
In this environment, disciplined bottom-up stock selection is essential to identifying structurally stronger businesses beyond benchmark heavyweights. We believe the portfolio is well positioned should the recovery broaden into under-owned areas of the market where fundamentals remain intact.
With a portfolio built around high-quality, lesser-known companies and a disciplined, active approach to capital allocation, we remain fully committed to our investment philosophy and to delivering long-term performance and shareholder value.
”The best time to buy quality stocks is now”.
Ruchir Sharma, Financial Times 01.12.2025
Dear Fellow MMIT Shareholder,
Since the inception of the strategy in 2018, our objective has remained unchanged: to deliver long-term performance by identifying high-quality, innovative, under-researched mid-cap compounders with strong fundamentals that are not represented in the benchmark. This disciplined investment philosophy has driven strong results over prior years, culminating in 35.2% outperformance against the MSCI EM Mid Cap Index in GBP terms by the end of 2024.
However, 2025 played out differently, despite emerging markets finally ending a decade of underperformance versus developed markets. The year proved challenging in relative terms for the strategy, as the market environment was particularly difficult for quality-oriented mid-cap stocks. Returns were increasingly driven by a narrow group of large, liquid companies and by style dynamics that ran counter to our investment approach.
That said, Q4 showed early signs of stabilisation and improvement. Over the quarter, MMIT’s net asset value returned 2.5%, while the MSCI EM Mid Cap Index (Net TR) delivered a return of 2.2% in GBP terms. This relative improvement was supported by solid operational performance across several portfolio holdings, with a number delivering results ahead of expectations.
Emerging markets recorded steady gains over the quarter, finishing the year as the strongest-performing global equity asset class. As is often the case in the early stages of a recovery, initial inflows were concentrated in the largest and most liquid stocks. Within the MSCI EM Index, the top five holdings accounted for over 40% of total returns in 2025 in USD terms, none of which MMIT hold.
Performance in EM Driven by a Few Large Companies
Our investment universe is deliberately focused on lesser-known, under-researched small- and mid-cap companies across emerging markets, where we believe our bottom-up research adds the greatest value by looking beyond well-known benchmark constituents. The under-researched nature of this segment—typically marked by limited coverage, lower visibility and minimal benchmark overlap—can give rise to pricing inefficiencies that are largely absent in the highly efficient mega-cap space.
Active management is more likely to add value in these less crowded areas of the market, where returns are driven more by company-specific fundamentals than by index flows. Against a backdrop of unusually narrow market leadership, we believe this positioning may offer meaningful potential for relative catch-up as fundamentals reassert themselves.
During 2025, the strategy’s emphasis on quality encountered significant style headwinds, with quality stocks—especially within emerging markets—suffering one of their worst periods of relative underperformance compared with the broader benchmark. Smaller companies, particularly growth-oriented businesses in the technology sector, were disproportionately affected by continued macroeconomic and geopolitical uncertainty.
Investor risk appetite remained constrained, with capital rotating towards perceived safe-haven assets such as gold and towards larger, more liquid equities viewed as more resilient in volatile markets.During this period, investors favoured sectors such as banks, commodities and defence-related industries, supported by higher interest rates, elevated fiscal and defence spending, and ongoing geopolitical tensions. This defence-led rotation provided relative support to parts of the industrials and commodities sectors.
These areas, which are deliberately excluded from the portfolio due to their regulatory complexity, capital intensity and limited pricing power, were generally trading at lower valuation multiples and tended to be more resilient during periods of market correction.
EM Quality Has Fallen Behind Value This Year
Additionally, China was a major contributor to emerging market performance in 2025, accounting for approximately 25% of MSCI Emerging Markets Index in USD terms gains while representing around 23.6% of the index. However, we believe the rally has been driven primarily by multiple expansion, improved sentiment and policy support rather than an improvement in underlying fundamentals such as earnings growth.
Economic data remains weak, highlighting a disconnect between market performance and a meaningful recovery, and gains have been concentrated largely in the technology sector, where valuations have become less compelling. Structural risks also remain, including the potential for abrupt and unpredictable regulatory intervention, as experienced in 2021.
Against this backdrop, we continue to approach the market with caution, while remaining open to selectively deploying capital where individual companies meet our quality, governance and valuation criteria, without compromising discipline in pursuit of exposure.
Furthermore, performance was negatively impacted by our exposure to the software and IT services sector (19.3% in MMIT versus 1.8% in the MSCI EM Mid Cap Index as of 31 December 2025). The sector experienced tariff-related volatility, which led many corporates to delay discretionary IT spending decisions into 2026. As Gartner, a leading independent IT research and advisory firm, has noted, this resulted in “a business pause on net-new spending due to a spike in global uncertainty.”
Looking ahead, Gartner forecasts global IT spending growth of 9.8% in 2026. We view the recent weakness as cyclical, with recovery prospects supported by AI-driven demand and the resumption of previously deferred projects.
As a result of these factors, relative performance this year has not matched the strong returns achieved in prior periods. While disappointing, such outcomes are not unusual for strategies with a high active share. They are an inherent feature of a differentiated investment approach and a key driver of long-term results. Periods of softer relative performance have occurred in the past and have often been followed by improved relative outcomes as stock-specific fundamentals reassert themselves. This is reflected in the trust’s since-inception outperformance of 6.5% against the MSCI EM Mid Cap Index in GBP terms, despite the current year’s drawdown.
Active portfolio management remained central to the team’s day-to-day process throughout the year. We increased exposure to existing high-conviction holdings trading at attractive valuations following periods of volatility and selectively initiated positions from our watchlist, taking advantage of temporary share price dislocations in companies we believe were unfairly impacted by broader market sentiment.
This has allowed us to acquire high-quality stocks at discounts to historical valuations during one of the weaker periods of relative performance for quality companies in recent years. At the same time, we trimmed or exited positions where changes in the macro environment had, in our assessment, materially weakened the investment case.
Over the course of the year, we rigorously revisited every investment case, challenging attribution, portfolio exposures and our assumptions around earnings and valuation. Above all, we have remained committed to our investment philosophy. Our focus is unchanged: investing in high-quality, lesser-known, well-managed companies that compound value over time and align with our strategy and responsible investment principles.
Style Headwinds Have Driven Valuation Compression
In this environment, the portfolio’s underlying fundamentals remain supportive. Market consensus forecasts a 23% forward EPS CAGR (three to five years) for the average portfolio company, supported by strong balance sheets and profitability, including a three-year average ROE of 23%, net debt/EBITDA of -0.5 and profit margins of 16%. In several cases, companies have delivered results ahead of expectations and seen earnings estimates revised upwards, yet share price performance has remained subdued.
MMIT Portfolio Offers Growth and Profitability
Periods such as these—following a challenging year but characterised by resilient fundamentals and improving growth prospects—are often when long-term opportunities in high-quality businesses begin to emerge.
”The best time to buy quality stocks is now”.
Ruchir Sharma, Financial Times 01.12.2025
Dear Fellow MEMF Shareholder,
Since the inception of the strategy in 2018, our objective has remained unchanged: to deliver long-term performance by identifying high-quality, innovative, under-researched mid-cap compounders with strong fundamentals that are not represented in the benchmark. This disciplined investment philosophy has driven strong results over prior years, culminating in 21.7% outperformance (MEMF Private C USD Founder) versus the MSCI EM Mid Cap Index in USD terms from inception through to the end of 2024.
However, 2025 played out differently, despite emerging markets finally ending a decade of underperformance versus developed markets. The year proved challenging in relative terms for the strategy, as the market environment was particularly difficult for quality-oriented mid-cap stocks. Returns were increasingly driven by a narrow group of large, liquid companies and by style dynamics that ran counter to our investment approach.
That said, Q4 showed early signs of stabilisation and improvement. During the quarter, MEMF’s net asset value increased by 2.9% (Private C USD Founder), compared with 2.2% for the MSCI EM Mid Cap Index (Net TR) in USD terms. This relative improvement was supported by solid operational performance across several portfolio holdings, with a number delivering results ahead of expectations.
Emerging markets recorded steady gains over the quarter, finishing the year as the strongest-performing global equity asset class. As is often the case in the early stages of a recovery, initial inflows were concentrated in the largest and most liquid stocks. Within the MSCI EM Index, the top five holdings accounted for over 40% of total returns in 2025 in USD terms, none of which MEMF holds.
Performance in EM Driven by a Few Large Companies
Our investment universe is deliberately focused on lesser-known, under-researched small- and mid-cap companies across emerging markets, where we believe our bottom-up research adds the greatest value by looking beyond well-known benchmark constituents. The under-researched nature of this segment—typically marked by limited coverage, lower visibility and minimal benchmark overlap—can give rise to pricing inefficiencies that are largely absent in the highly efficient mega-cap space.
Active management is more likely to add value in these less crowded areas of the market, where returns are driven more by company-specific fundamentals than by index flows. Against a backdrop of unusually narrow market leadership, we believe this positioning may offer meaningful potential for relative catch-up as fundamentals reassert themselves.
During 2025, the strategy’s emphasis on quality encountered significant style headwinds, with quality stocks—especially within emerging markets—suffering one of their worst periods of relative underperformance compared with the broader benchmark. Smaller companies, particularly growth-oriented businesses in the technology sector, were disproportionately affected by continued macroeconomic and geopolitical uncertainty.
Investor risk appetite remained constrained, with capital rotating towards perceived safe-haven assets such as gold and towards larger, more liquid equities viewed as more resilient in volatile markets. During this period, investors favoured sectors such as banks, commodities and defence-related industries, supported by higher interest rates, elevated fiscal and defence spending, and ongoing geopolitical tensions. This defence-led rotation provided relative support to parts of the industrials and commodities sectors.
These areas, which are deliberately excluded from the portfolio due to their regulatory complexity, capital intensity and limited pricing power, were generally trading at lower valuation multiples and tended to be more resilient during periods of market correction.
EM Quality Has Fallen Behind Value This Year
Additionally, China was a major contributor to emerging market performance in 2025, accounting for approximately 25% of MSCI Emerging Markets Index gains in USD terms while representing around 23.6% of the index. However, we believe the rally has been driven primarily by multiple expansion, improved sentiment and policy support rather than an improvement in underlying fundamentals such as earnings growth. Economic data remains weak, highlighting a disconnect between market performance and a meaningful recovery, and gains have been concentrated largely in the technology sector, where valuations have become less compelling.
Structural risks also remain, including the potential for abrupt and unpredictable regulatory intervention, as experienced in 2021. Against this backdrop, we continue to approach the market with caution, while remaining open to selectively deploying capital where individual companies meet our quality, governance and valuation criteria, without compromising discipline in pursuit of exposure.
Performance was also negatively impacted by our exposure to the software and IT services sector (20.2% in MEMF versus 1.8% in the MSCI EM Mid Cap Index as of 31 December 2025). The sector experienced tariff-related volatility, which led many corporates to delay discretionary IT spending decisions into 2026. As Gartner, a leading independent IT research and advisory firm, has noted, this resulted in “a business pause on net-new spending due to a spike in global uncertainty.”
Looking ahead, Gartner forecasts global IT spending growth of 9.8% in 2026. We view the recent weakness as cyclical, with recovery prospects supported by AI-driven demand and the resumption of previously deferred projects.
As a result of these factors, relative performance this year has not matched the strong returns achieved in prior periods. While disappointing, such outcomes are not unusual for strategies with a high active share. They are an inherent feature of a differentiated investment approach and a key driver of long-term results. Periods of softer relative performance have occurred in the past and have often been followed by improved outcomes as stock-specific fundamentals reassert themselves.
Active portfolio management remained central to our day-to-day process throughout the year. We increased exposure to existing high-conviction holdings trading at attractive valuations following periods of volatility and selectively initiated positions from our watchlist, taking advantage of temporary share price dislocations in companies we believe were unfairly impacted by broader market sentiment.
This approach has allowed us to acquire high-quality stocks at discounts to historical valuations during one of the weaker periods of relative performance for quality companies in recent years. At the same time, we trimmed or exited positions where changes in the macro environment had, in our assessment, materially weakened the investment case.
Over the course of the year, we rigorously revisited every investment case, challenging attribution, portfolio exposures and assumptions around earnings and valuation. Above all, we have remained committed to our investment philosophy. Our focus is unchanged: investing in high-quality, lesser-known, well-managed companies that compound value over time and align with our strategy and responsible investment principles.
Style Headwinds Have Driven Valuation Compression
In this environment, the portfolio’s underlying fundamentals remain supportive. Market consensus forecasts a 26% forward EPS CAGR (three to five years) for the average portfolio company, supported by strong balance sheets and profitability, including a three-year average ROE of 25%, net debt/EBITDA of -0.7 and profit margins of 15%. In several cases, companies have delivered results ahead of expectations and seen earnings estimates revised upwards, yet share price performance has remained subdued due to the macro headwinds described above.
MEMF Portfolio Offers Growth and Profitability
Periods such as these—following a challenging year but characterised by resilient fundamentals and improving growth prospects—are often when long-term opportunities in high-quality businesses begin to emerge.
We’re excited to share the AIC’s Meet the Manager feature with Carlos von Hardenberg, Lead Manager of Mobius Investment Trust and the Mobius Emerging Markets Fund.
I would have loved to be an entrepreneur, as I’ve always admired their vision, courage, and resilience in turning ideas into lasting businesses. Although I guess that mirrors what we do as investors – seeking out listed companies often still led or owned by founding families, backing those with genuine entrepreneurial spirit and a long-term horizon, and helping them grow further through our active engagement.
For me, pride comes less from one single moment and more from a 25-year journey in investing, constantly learning, finding new opportunities, and growing along the way. None of this would have been possible without the unwavering support of my wife, who not only encouraged me but also moved with me across countries and continents. That partnership has been the foundation for everything I’ve been able to achieve professionally.
In hindsight, leaving Franklin Templeton was a big step and did not come easy, as I had great respect and appreciation for my colleagues there. That said, setting up a new fund in this industry, especially doing so only a year and a half before the Covid-19 pandemic broke out, was the greatest challenge of my career.
Be curious, open-minded and travel as much as possible. In terms of investing, focus on Asia as this is where a lot of the greatest innovation lies.
I enjoy spending time with my family and being outdoors, whether that’s hiking in the mountains, cycling or simply exploring nature together.
The last book I read was Chip War. It offers a fascinating account of the semiconductor industry, weaving together historical context, geopolitical dynamics, and the stories of the individuals who shaped it. I found the discussion of Russia’s role particularly insightful, as well as the vivid characterisations of the pioneers behind the industry. Alongside the biography of Morris Chang, it’s a must-read.
The Weeknd, amazing! And Ann-Sophie Mutter in New York, mind-blowing!
The Usual Suspects and The Godfather. Amazing acting, great music and unparalleled tension.
Quality time with friends and family, as well as good leadership to support my colleagues.
🔗 https://www.theaic.co.uk/aic/news/commentary/meet-the-manager-carlos-von-hardenberg [theaic.co.uk]