Sustainable Growth Advisers (SGA), an investment management company, released its fourth-quarter investor letter for its “Emerging Markets Growth Strategy.” A copy of the letter can be downloaded here. The fourth quarter of 2025 marked strong divergence from the market. Market leadership by AI beneficiaries and revival of cyclical sectors dominated the market, while quality growth strategies faced challenges. In Q4 2025, the portfolio returned 0.8% (Gross) and 0.6% (Net) compared to the MSCI EM Net TR Index return of 4.7% and the MSCI EM Growth Net TR Index return of 3.3%. In 2025, the portfolio delivered strong returns of 23.8% (Gross) and 22.8% (Net) but lagged the 33.6% and 34.3% returns for the indexes, respectively. The portfolio projects 13% revenue growth and 16% earnings growth annually for the next three years. Please review the Strategy’s top five holdings to gain insights into their key selections for 2025.
In its fourth-quarter 2025 investor letter, SGA Emerging Markets Growth Strategy highlighted Tencent Music Entertainment Group (NYSE:TME) as a notable detractor. Tencent Music Entertainment Group (NYSE:TME) is an online music entertainment platform that provides music streaming, online karaoke, and live streaming services. On February 11, 2026, Tencent Music Entertainment Group (NYSE:TME) stock closed at $16.94 per share. One-month return of Tencent Music Entertainment Group (NYSE:TME) was 2.05%, and its shares are up 32.76% over the past twelve months. Tencent Music Entertainment Group (NYSE:TME) has a market capitalization of $28.53 billion.
SGA Emerging Markets Growth Strategy stated the following regarding Tencent Music Entertainment Group (NYSE:TME) in its fourth quarter 2025 investor letter:
“Tencent Music Entertainment Group (NYSE:TME) was a detractor during the quarter, as concerns around rising competition and margin dilution weighed on investor sentiment despite strong top- and bottom-line results. The continued growth of Soda Music, backed by Douyin’s traffic, raised questions about their potential impact to the long-term competitive dynamics, particularly at the lower end of the market where monetization remains challenging. Additionally, investments in new verticals such as concerts and merchandise, while strategically valuable, are expected to pressure gross margins in the coming year. However, we view these initiatives as attractive as they are accretive to overall profits and should help further differentiate the platform to drive SVIP (Super VIP) adoption which increases average revenue per paying user (ARRPU). We continue to believe in TME’s long-term growth prospects and competitive advantage given its differentiated content ecosystem, strong brand, and ability to innovate and capture new opportunities across China’s evolving music industry. However, we continued to trim the position in the quarter to a below-average weight on relative valuation after strong performance in the first half of 2025.”
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