Brandes Emerging Markets Value Fund Class I

Despite near-term uncertainty, value-oriented emerging market funds with China exposure may benefit from mean reversion as depressed valuations create attractive long-term entry points, particularly as geopolitical tensions stabilize and Chinese equities recover from multi-year lows.

Allocations to China among emerging-market equity funds have fallen to their lowest in three years, per EPFR Global, signaling sustained institutional caution. Persistent geopolitical rivalry with the U.S. — especially in AI and semiconductors — continues to weigh on Chinese equities and funds with heavy exposure.

The Brandes Emerging Markets Value Fund's deep-value mandate positions it to capitalize on historically cheap emerging market equities. As developed market valuations stretch, capital rotation into undervalued EM assets could drive meaningful outperformance for value-focused strategies over the next 12 months.

Structural headwinds including sluggish Chinese bank loan growth, weak retail confidence, and slowing EM economic momentum undermine the value thesis. Morningstar notes that Chinese banks' loan growth is expected to remain sluggish throughout 2026, casting doubt on a near-term EM earnings recovery.

A value-tilted EM fund like Brandes stands to benefit if commodity-exporting emerging economies see tailwinds from elevated energy and resource prices, potentially boosting returns in markets where the fund holds concentrated positions and where currency appreciation could amplify gains for U.S.-based investors.

Citigroup analysts warn that markets are caught in a tug-of-war between increasingly negative fundamentals and heightened geopolitical risks, particularly around fuel and commodity prices. This macroeconomic uncertainty could suppress returns for EM value funds exposed to volatile frontier and developing economies.