Investors in Lewis Kaufman’s emerging-market equity fund have quadrupled the returns of the benchmark index over the past half decade. That doesn’t mean the man behind it is optimistic about the asset class.

Kaufman, who oversees the $5.2 billion Artisan Developing World Fund, said people who take the traditional approach of investing in less industrialized nations will be disappointed by their returns. China, hit early by the Covid-19 pandemic and now recovering faster than many Western nations, is an exception. The world’s second-largest economy has developed a reliable ecosystem for innovation and is home to some attractive stocks, he said.

“I think most emerging markets will struggle over a five- to 10-year basis,” Kaufman, 44, said in an interview. “A disproportionate amount of value is in relatively few countries and companies.”

Since its inception in June 2015, his developing-nation fund has returned 116%, trouncing the MSCI Emerging Markets Index’s 29% return, according to data compiled by Bloomberg. That ranks it in the 99th percentile among peers over the past year and five years, the data show. Rallies for e-commerce companies including Sea Ltd. in Singapore and MercadoLibre Inc. in Buenos Aires have helped boost Kaufman’s performance in 2020.

The San Francisco-based money manager attributes his success to focusing on concentrated bets rather than dwelling on benchmark weightings.

“If I don’t think South Africa or Mexico or India or Brazil are places that will be good homes for capital, then I believe I don’t necessarily need to invest there at all,” he said.

Almost 36% of his fund is invested in China, while another 26% is dedicated to U.S. companies including Visa Inc. that do business in developing nations, according to the fund’s filings as of March 31. His other top country weights include the Netherlands, India and Argentina, the filings show.

Kaufman said Chinese stocks benefit from skilled labor and high savings rates. The Shanghai Composite Index has jumped by 20% in dollar terms this past month as parts of the country emerged from lockdowns. Meantime, other developing-nation economies could suffer declines in potential output due to a lack of investment in human capital, he said.

“The emergence of a services-oriented economy in China -- that’s not occurring anywhere else in the world,” Kaufman said.

--With assistance from Jenny Surane.

This article was provided by Bloomberg News.