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Genesis Emerging Markets lowers its fees to tighten discount

GSS : Genesis Emerging Markets lowers its fees to tighten discount

Genesis Emerging Markets lowers its fees to tighten discount – Genesis Emerging Markets Fund  (GSS) has published it’s results for the year ended 30th June 2018.

The NAV total return per share of the company rose by 6.8% over the twelve month period, which is in line with its benchmark, the MSCI EM (TR) Index. The share price, however, returned 8.4%.

Performance

After two years of strong performance from emerging markets, with the MSCI EM (TR) Index rising by  78% in US dollar terms between 31st January 2016 and 31st January 2018, emerging markets have not been quite so spectacular.  The potential impact on  companies of a strengthening US dollar, increasing disruption to global trade, and weaker political governance in some countries have all been reflected in the market’s decline. After rising by 16.1% in US dollar terms in the second half of 2017, the index fell by 6.5% in the first half of 2018, returning 8.6% over the twelve month period.

The strengthening of sterling against the dollar over the year (despite the stronger dollar in recent months) gave UK investors a slightly lower Index return, of 6.8% from 8.6% in USD. The company reported an increase in the NAV per share, giving a 6.8% return in sterling terms, in line with the Index.

It is worth noting that the fund’s performance lagged the rise of the market in 2017, but did not fall as far as the index during the early part of 2018. Events in emerging markets, particularly Turkey and Argentina contributed to increased volatility since the financial year end.

Discount to NAV

Moves have been made to encourage the discount to NAV of the company to tighten, including increased marketing and reporting, payment of a dividend in December 2017 and tender offers. Particularly, the board reduced the management fees in mid-2017 to 0.95%

Chairman’s outlook

“At the time of writing emerging markets continue to experience considerable volatility, driven by trade disputes, as well as a stronger US dollar and concerns around the economic management of Turkey and Argentina in particular. Consequently markets have fallen significantly over the last few weeks.

This somewhat challenging environment serves to remind investors – especially following two years of particularly strong returns – that the developmental process in emerging markets does not run consistently smoothly, and that market volatility is an ever-present characteristic to be faced by investors.

That said, looking over the longer term, sterling-based investors have been rewarded by emerging markets over the past few years. Of key importance is the fact that the secular development trends remain positive.

As I have noted to shareholders in previous Reports, the populations of low-income countries are seeing income levels rising gradually towards those in high-income markets – a trend likely to continue for many decades to come. The steady progress that countries and companies in the emerging markets universe are making (notwithstanding current issues in Turkey and elsewhere) to improve the quality of their governance is substantial. And the inefficiency of many emerging stock markets – through incomplete or misunderstood information, or of extremes in sentiment driving markets to unwarranted levels, both high and low – provides opportunities for skilful investors to buy and sell at attractively mispriced levels.

The Board shares with the Manager a strong conviction in the long-term attractions of investing in developing countries. We continue to believe that a patient, long-term investment approach, combined with the skill to identify high-quality companies who can sustain business success over many years, will continue to reward investors handsomely for their commitment to emerging markets.”

GSS : Genesis Emerging Markets lowers its fees to tighten discount

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