Market backdrop
2025 was a good year for risk assets as global equities posted another year of positive returns driven by growing enthusiasm for AI-related investments and the start of monetary easing in major economies. The overriding theme of the year was the global tech giants’ insatiable investment appetite for all things datacentre-related to speed up the adoption of AI globally. Although president Trump’s imposition of large tariffs on allies and rivals alike dented investor confidence at the start of the year, the impact to date has been smaller than feared and the market quickly rebounded. With many of the leading technology suppliers located in South Korea, Taiwan and China, Emerging Markets equities delivered strong returns, outpacing developed markets for the first time since 2020. In addition to a strong technology sector, the Korean market was buoyed by the ‘Value Up’ programme, which has put stronger emphasis on shareholder returns. Most commodities aside from oil also rallied, benefiting markets such as South Africa and Brazil. At the other end of the spectrum, political unrest weighed on Southeast Asian markets while a sharply lower oil price weighed on Saudi Arabia.
If nothing else, 2025 was a stark reminder that market pricing and narratives can change abruptly and significantly. Only 12 months ago the market was ruing the failed declaration of martial law and upcoming presidential election in South Korea. Since then, South Korea’s governance reform has accelerated, and the Korean stock market delivered its highest return since 1999. This benefitted SKAGEN Kon-Tiki as South Korea was the highest market exposure during the year.
Performance summary
SKAGEN Kon-Tiki performed strongly in 2025 and delivered significant and consistent outperformance during the year. In addition to the material overweight position in South Korea, the fund benefitted from another year of strong stock-picking in China as well as limited exposure to expensive and underperforming markets such as India and Saudi Arabia. Brazil partially offset this where our holdings in export-oriented commodity producers were hurt by a combination of currency and commodity price headwinds.
At single-stock level, the top three contributors for the year were our larger holdings in the technology and internet sectors, namely Alibaba, Samsung Electronics and Taiwan Semiconductor (TSMC). On the negative side, Brazilian sugar & ethanol producer Raizen sold off on elevated financial leverage and oil & gas producer Petrobras on lower energy prices. Turkish Coca-Cola bottler Icecek also sold off on weaker top-line trends as inflation and currency headwinds weigh on consumers.
These performance trends were also present in December as Samsung Electronics, Ping An and TSMC delivered strong returns and our Brazilian holdings in cash & carry retailer Assai and Banco do Brasil sold off. Our significantly trimmed position in Alibaba also detracted from results during the month.
Fourth quarter contributors
For the last quarter of 2025, the top three contributors were Samsung Electronics, Ping An and TSMC. Both Samsung Electronics and TSMC have performed strongly during the year and expectations of record earnings in 2026 have continued to build. This was corroborated by our recent visit to many of the leading technology suppliers in Korea, Taiwan and Japan. It was also pleasing to see long-term holding Ping An continuing to perform strongly due to a combination of improving operational trends and its significant China equity market exposure.
On the negative side, the weakest contributors were Assai, Alibaba and Prosus. Like Alibaba, Prosus sold off on the recent weakness in Chinese internet stocks due to its holding in Tencent. For Assai, the market has become increasingly concerned that higher-for-longer interest rates will weigh on consumption and the company’s top-line prospects.
Portfolio changes
We have made a larger-than-usual number of portfolio changes during the year. This has largely been due to our price-driven investment strategy, and we have significantly trimmed or sold off holdings as they have approached or exceeded our estimates of fair value. In addition, we have made a number of new investments and broadened the portfolio’s geographic exposure. Unfortunately, one such market, Georgia, proved to be a short-lived affair as the share price ran away from us before we could buy a full position and we therefore exited Georgia Capital at a small profit in December. We also exited two disappointing investments in Brazilian conglomerate Cosan and Korean packaging company Samyang Packaging during the month. Although we participated in the recent discounted recapitalisation of Cosan, the subsequent dilution of the firm’s equity value meant we no longer saw sufficient upside to maintain our position. This was also the case for Samyang, where limited liquidity has prevented us from managing the position more effectively.
We made another new investment in Poland during December. Online retailer Allegro entered the portfolio following a period of significant underperformance versus the market. Allegro is Poland’s leading e-commerce player with over 15m active customers and a well-established and profitable ecosystem of merchants, delivery infrastructure, and payments solutions. It also has loss-making international operations across Central and Eastern Europe, which have weighed on the shares. Since its IPO in 2020, Allegro has fallen by c60% while the Polish market has returned more than 150%. Trading on 15x 2026 earnings with a capital light and cash generative business model, we now see a highly attractive risk/reward proposition driven by continued profitable growth in Poland and an in-progress plan to bring its international operations to break-even levels.
We have continued to build our positions in recently initiated investments such as Bank of the Philippine Islands and Chinese online retailer JD.com while also adding to Assai after the recent sell-off. We also increased our holding in Hon Hai, which we see as an underappreciated AI-beneficiary owing to its GPU module and server assembly business. These investments were funded through trimming our positions in Ping An and pork producer WH Group following a period of strong performance.
Outlook
SKAGEN Kon-Tiki delivered strong absolute and relative performance in 2025. Despite this, the fund maintains its deep value characteristics and continues to trade on just 9x earnings and modestly above book values with a dividend yield exceeding 3%. With the market having re-rated during the year, this means that the fund’s discount to the MSCI EM index has widened and now stands at c40% across earnings and book values. As value-based investors, we find these portfolio characteristics highly attractive and remain optimistic about the fund’s prospects.