Interactive Investor

Fidelity to take over management of £1.2bn emerging market trust

2nd July 2021 10:26

Kyle Caldwell from interactive investor

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The FTSE 250-listed investment trust will hand Fidelity the management keys if shareholders approve. 

Fidelity has been appointed the new investment manager of Genesis Emerging Markets (LSE:GSS), following a review by the investment trust’s board.

The trust, which is listed on the FTSE 250 index and has £1.2 billion in assets, will hand Fidelity the management keys in September providing that shareholder approval is granted. The trust will change its name to Fidelity Emerging Markets Limited (LON: FEML).

If approved by shareholders, Nick Price, who has for over a decade been the lead manager of the open-ended Fidelity Emerging Markets, will manage the trust. He will be supported by assistant portfolio manager Chris Tennant.

Fidelity Emerging Markets Limited’s investment objective will be to achieve long-term capital growth from both listed and unlisted emerging market companies, as well through using derivatives to short shares (profit if a share price falls). 

The annual management fee will drop from 0.9% to 0.6% a year. In addition, Fidelity has also agreed to waive its investment management fee for the first nine months following its appointment.

Commenting on the appointment of Fidelity, Hélène Ploix, chair of Genesis Emerging Markets, said: “Following a thorough review of its investment management arrangements and after considering a range of strong candidates in a competitive process, it was clear to the board that Fidelity has the depth of expertise in emerging markets and in the management of investment trusts.

“The company would also benefit considerably from Fidelity’s brand, and its ability to attract new shareholders with its significant marketing resource. We look forward to working with the new portfolio managers and the wider team.”

Genesis Emerging Markets has also proposed a tender offer, which will enable up to 25% of the shares in issue to be sold at a 2% discount. This and the proposed change in management to Fidelity will be put to a shareholder vote in August.

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Genesis Investment Management has managed the trust for more than 30 years. The firm points out that the trust's share price has outperformed its benchmark, the MSCI Emerging Market Total Return Index, since inception and over 10, five, three and one year(s) to 30 June 2021.

Arindam Bhattacharjee, managing partner at Genesis Investment Management, said: “We are proud to have delivered excess returns for shareholders in the trust for over three decades, while staying true to our long-term investment approach. The board’s proposal represents a major change in both investment policy and style of the trust. Ultimately, the company belongs to its shareholders, and we believe that their wishes must remain paramount.”

Winterflood, the investment trust analyst, expects shareholders to approve the management group change. It points out that the trust’s shareholder base is “dominated by a handful of institutional investors” and its “performance record pales in comparison to its closest peers”.

It adds: “We regard the appointment of Fidelity as a highly positive move, particularly given its success in attracting retail investors to its five-strong investment trust stable.”  

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