Barings Korea Trust impacted by Middle East crisis

Important geopolitical events such as the current conflict in the Middle East can have a huge impact on markets around the world, even when they are nowhere near the scene of the action. A case in point is Korea, where the main KOSPI 200 index has fallen sharply following an extraordinary bull run in 2025.

The weakness has been driven by a combination of broad risk aversion, a spike in the oil price - Korea is a major oil importer - and profit-taking after a strong 12-month rally. Yet semiconductor heavyweights such as Samsung Electronics and SK hynix remain dramatically higher over the past year due to the huge investment in AI.

Few would have anticipated that a popular fund like the Barings Korea Trust, a January bestseller, would have been as vulnerable to the events in the Middle East. However, it is important for investors not to panic and to retain a long-term perspective.

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Objective and approach

The Barings Korea Trust aims to provide a total return in excess of the MSCI Korea Index over a rolling five-year period, by primarily investing in equity and equity related securities in the country. Its experienced managers follow a quality growth at a reasonable price (GARP) approach and believe that earnings growth is the key driver of performance over the medium to long-term.¹

They use fundamental research and a disciplined investment process that combines quality, growth, upside and environment, social, governance (ESG) factors to identify attractively priced stocks that they think can outperform the market.²

The underlying portfolio

At the end of January, the fund held 51 companies, with the ten largest positions accounting for 49.7% of the assets. These included well-known names such as Samsung Electronics and Hyundai Motor, alongside other major Korean businesses like chipmaker SK hynix.³

The main sector weightings were Information Technology and Industrials, which represented 37.4% and 29.9% of the assets respectively. It is also worth noting that the fund is not managed with reference to the benchmark, as evidenced by the active share of 56.1% and the fact that almost a quarter of the portfolio consists of stocks that are outside the index.⁴

What are the manager’s latest views?

Writing in the interim accounts at the end of October, the managers said that they maintain a constructive long-term view on Korean equities, underpinned by structural growth drivers, improving corporate governance and attractive valuations.⁵

“Korea’s leadership in global hardware supply chains positions it to benefit from sustained AI-driven demand and broader data growth. Korea’s competitive strength in industrial and manufacturing sectors has also been reaffirmed by rising orders and collaboration requests from US companies, reflecting ongoing US – China tensions, growing demand for grid infrastructure, and the US’s commitment to revitalising its manufacturing base.”⁶

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Performance

Korea was the top performing market in 2025. As a result, the I GBP accumulation share class delivered a remarkable return of 72.7% net of fees, although it still lagged behind the 86.1% gain generated by the benchmark.⁷ Please remember past performance is not a reliable indicator of future returns.

This sharp re-rating left the fund highly sensitive to any shift in sentiment towards AI or a market wobble triggered by international events. After peaking at 876.7p on 26 February, the I GBP accumulation shares had fallen to 762.8p by 16 March, representing a decline of 13%.⁸

Past performance is not a reliable indicator of future returns
Source: Morningstar, total returns from 31.12.20 to 31.12.25. Excludes initial charge.

Risks and costs

It is inevitable that a single country fund investing in a market like Korea will be highly volatile and capable of both strong gains and sharp declines. For that reason, it should only form a small part of a diversified portfolio and be viewed as a long-term holding. 

The latest ongoing charges figure is 1.73%⁹, which is expensive but reflects the additional costs associated with running a specialist mandate focused on a single emerging market.

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• Read: Top 10 best-selling ISA and SIPP funds in February

Source:

^1,2,5,6 Barings Korea Trust, interim accounts, 31.10.25
^3,4,7,9 Barings Korea Trust, factsheet, 31.1.26
⁸ Barings Korea Trust

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This fund can invest in overseas markets and so the value of investments can be affected by changes in currency exchange rates. Before investing, please read the relevant key information document which contains important information about the fund. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.