By Gavin Lumsden, Citywire Investment Trust Insider, 19 Oct, 2021 at 16:39
Fidelity’s coup in winning the £1bn mandate to run the former Genesis Emerging Markets has hit a bump with 85% of the investment trust’s shareholders voting to cash in their shares yesterday.
Fidelity will still hang on to three quarters of the trust’s assets as the tender offer following its appointment by the board this summer was restricted to 25%.
Nevertheless, the scale of the attempted exodus shows the challenge facing Fidelity and Citywire AA-rated fund manager Nick Price and deputy Chris Tennant as they seek to win over investors after the dismissal of Genesis Investment Management in July after a strategic review by the board.
In a stock exchange announcement, the now renamed Fidelity Emerging Markets (FEML) said 103.3m of its 121.5m shares had been validly offered for sale back to the company. The most the trust had offered to buy was 30.4m.
QuotedData analyst James Carthew said ‘that is a massive vote of no confidence in the trust’.
He added: ‘The implication is that there are holders of 70m shares that would sell if given the opportunity.
‘There is no statement from the board on this, but at the very least we think shareholders should be offered a continuation vote on this result,’ Carthew said.
Analysts had welcomed the decision to appoint Fidelity given the trust’s poor long-term performance under Genesis, but had anticipated the tender offer would be over-subscribed.
The problem for Fidelity and the board, chaired by Helene Ploix, is that over half the trust’s shares are held by value investors City of London, Lazards, Wells Capital and 1607 Capital Partners. They will likely have been happy to sell some of their shares at 2% below net asset value given their discount had widened to nearly 13% after the switch to Fidelity.
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