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.”
Tencent Music Entertainment Group (NYSE:TME) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 35 hedge fund portfolios held Tencent Music Entertainment Group (NYSE:TME) at the end of the third quarter, up from 31 in the previous quarter. While we acknowledge the potential of Tencent Music Entertainment Group (NYSE:TME) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
In another article, we covered Tencent Music Entertainment Group (NYSE:TME) and shared the list of must-buy non-tech stocks to invest in. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.