Templeton Emerging Markets Trust: Missed the Market It Was Built to Capture

Alpesh Patel
Oct 25
2 min read

Emerging markets are supposed to be the engine of global growth. Faster GDP, rising middle classes, long-term demographic tailwinds. And yet, investors in the Templeton Emerging Markets Trust (TEM) have captured more frustration than fortune.

The Numbers

Over the past five years, the trust is up +50%, or roughly 8.4% per year. That’s almost identical to global developed markets - but well below its own benchmark, which has doubled investors’ money (+100%).

Investment	Total Return	CAGR
TEM (Trust)	+50%	8.4% p.a.
MSCI EM (Benchmark)	+100%	14.9% p.a.
MSCI World (Developed)	+45–50%	8.0–8.4% p.a.

£100,000 invested five years ago in TEM is now worth about £149,000. The same amount in a simple EM index tracker would be worth £200,000.

What Went Wrong?

Chronic underweight to China’s tech boom (2019–2022): while Alibaba, Tencent, and Meituan drove EM index gains, TEM lagged with a more “value-oriented” bias.
High conviction, wrong timing: Templeton has historically favoured contrarian picks in Brazil, India, and frontier markets. When EM momentum was in large-cap tech, this hurt performance.
Fees: As an actively managed trust, the extra cost (c.1%) compounds the pain when stock selection fails.
Discount to NAV: TEM has persistently traded at a 10–15% discount, further reducing total shareholder returns.

The Cost of Underperformance

Over 20 years, the compounding effect of underperforming by 6–7% per year is brutal:

Investment	CAGR	20-Year Value of £100k
TEM (8.4% p.a.)	8.4%	£505,000
MSCI EM (14.9% p.a.)	14.9%	£1,589,000

That’s a gap of £1.08 million — the price of active management gone wrong.

The Verdict

TEM has underperformed not because emerging markets have failed, but because its strategy hasn’t kept up with what drives emerging markets today - technology, scale, and structural growth.

The result?A fund built to capture emerging-market dynamism has instead mimicked global developed markets, with higher risk and lower reward.

For long-term investors, the lesson is simple:If you want emerging-market exposure, buy the index. If you want alpha, make sure you’re actually getting some.

Key Takeaway

Templeton’s famous name no longer guarantees superior performance.In the past five years, the only thing that’s truly “emerged” is how expensive mediocrity can be.

Here’s the 20-year compounding projection for Templeton Emerging Markets Trust (TEM) versus its benchmark:

£100k Compounded Over 20 Years

Investment	Annualised Return	20-Year Value of £100k
Templeton Emerging Markets Trust (TEM)	8.4% p.a.	£501,864
MSCI Emerging Markets (Benchmark)	14.9% p.a.	£1,608,424

Takeaway

£100k in TEM compounds to £502k over 20 years.
The same in a simple MSCI Emerging Markets tracker grows to £1.6 million.
That’s a £1.1 million opportunity cost - the price of consistent underperformance in a high-growth market.

This visual perfectly illustrates how “losing a few percentage points a year” quietly destroys wealth.

Templeton’s active approach hasn’t kept pace with the very market it was designed to exploit - and the gap only widens over time.

Disclaimer: This content is opinion based on the disclosed facts and sources above, including fund factsheets, benchmark data, and publicly available filings as at time of publication. An honest person could hold this opinion on those facts (Defamation Act 2013, s.3). I publish this in the public interest to inform UK savers about costs, risk, and performance of widely‑marketed products (s.4).

Alpesh Patel OBE