The Artisan Developing World Fund faced a challenging first quarter in 2026, with its Investor Class recording a notable decline in returns, diverging significantly from the broader emerging markets benchmark. However, the fund's forward-looking investment philosophy remains anchored in the transformative potential of artificial intelligence, meticulously crafting a portfolio to harness both direct and indirect benefits from the global proliferation of AI technologies, while upholding its fundamental investment principles.

Amidst a fluctuating global economic landscape, the fund emphasizes the burgeoning role of AI, noting significant progress in model capabilities and revenue generation within the AI sector. Concurrently, the robust trade performance of China, marked by a record surplus driven by strong exports and a favorable currency, underscores a dynamic international trade environment. The fund's strategic allocations reflect an anticipation of sustained innovation and market expansion within these key technological and economic spheres.

Q1 2026 Performance and Market Dynamics

In the first quarter of 2026, the Artisan Developing World Fund's Investor Class registered a return of -17.34%, contrasting sharply with the MSCI Emerging Markets Index's -0.17% performance. This divergence highlights a period of significant volatility and specific challenges encountered by the fund's holdings within the developing world. The market backdrop for this period was characterized by evolving global economic conditions, including inflationary pressures, shifts in central bank policies, and geopolitical uncertainties, which collectively impacted investor sentiment and asset valuations across emerging markets. Despite these headwinds, the fund's management remains focused on its long-term investment thesis, emphasizing that short-term fluctuations are often inherent in growth-oriented portfolios in dynamic regions. The underperformance prompts a closer examination of portfolio components and their resilience against broader market trends, reinforcing the need for strategic positioning in high-growth, innovative sectors.

The first quarter of 2026 proved to be a testing period for the Artisan Developing World Fund (Investor Class), which reported a return of -17.34%, markedly trailing the MSCI Emerging Markets Index's -0.17%. This performance differential underscores a period of heightened market sensitivity and localized pressures within the emerging economies where the fund primarily invests. Key factors influencing this performance included a complex interplay of global macroeconomic indicators such as persistent inflation, the tightening of monetary policies by major central banks, and an unpredictable geopolitical climate that collectively contributed to a cautious investment environment. Additionally, specific regional or sector-specific challenges may have disproportionately affected certain holdings within the fund's portfolio, leading to the observed downturn. However, the fund's strategic outlook continues to center on identifying and investing in companies poised for long-term growth, viewing periods of market correction as opportunities to refine and strengthen its holdings in promising areas, particularly those at the forefront of technological advancement and global economic shifts. This perspective is crucial for understanding the fund's ongoing commitment to its core investment principles amidst short-term market turbulence.

Strategic AI Investment and Global Trade Insights

The Artisan Developing World Fund has strategically adopted an AI-forward investment approach, positioning its portfolio to directly and indirectly capitalize on the accelerating expansion of artificial intelligence. This strategy involves significant allocations to companies at the forefront of AI development, such as British semiconductor design firm ARM Holdings and Chinese cloud solutions provider Kingsoft Cloud, alongside established global players like Coca-Cola and Netflix, which are increasingly integrating AI into their operations for enhanced efficiency and customer engagement. The fund acknowledges the rapid advancements in AI models, exemplified by Anthropic's impressive revenue growth and the emergence of OpenClaw AI, which offers new pathways for agentic AI adoption. This focused investment in AI reflects a belief in its transformative power across various industries and its potential to drive substantial long-term value, aligning with the fund's commitment to core investment principles while embracing future-oriented technologies.

The Artisan Developing World Fund's investment strategy is deeply rooted in an AI-forward philosophy, designed to leverage the immense growth potential unleashed by the pervasive spread of artificial intelligence. This involves a dual approach: investing in companies that are direct enablers of AI, such as semiconductor manufacturers and cloud computing platforms, and those that are indirect beneficiaries, by adopting AI to innovate their services and products. Notable holdings include ARM Holdings, a leader in semiconductor design, and Kingsoft Cloud, a key player in the Chinese cloud services market, both critical to the infrastructure supporting AI development. The fund also includes companies like Coca-Cola and Netflix, which, while not primarily AI firms, are extensively utilizing AI for market analysis, content recommendation, and operational optimization. The rapid progress in AI, highlighted by Anthropic's significant revenue milestones and the innovative capabilities of OpenClaw AI in fostering agentic AI adoption, reinforces the fund's conviction in this sector. Furthermore, the fund observes China's impressive trade surplus, reaching a record $213.6 billion in the first two months of 2026, propelled by robust exports and a devalued currency. This indicates a strong global demand for Chinese goods and services, including its burgeoning AI and technology exports, which are increasingly finding international buyers, supported by competitive pricing and an expanding global footprint. The fund aims to harness these interconnected trends, fostering a portfolio that is resilient, growth-oriented, and strategically aligned with the future of technology and global commerce.