The long and short of emerging markets
Fidelity Emerging Markets Limited (FEML) offers investors a distinct route into emerging market equities. Its managers run a genuinely unconstrained mandate, investing across the market cap spectrum and maintaining broad diversification by geography and sector. A key differentiator is the fund’s use of short positions held alongside its long book, giving investors exposure to opportunities – and inefficiencies – at both the higher- and lower-quality ends of the market.
Performance has been particularly strong during the last 12 months, helped by a supportive backdrop for emerging markets. This has been accompanied by a tightening in the discount, with scope for this to narrow further if sentiment continues to improve.
Long-term capital growth from emerging markets
FEML aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging market companies, both listed and unlisted.
| Year ended | Share price total return (%) | NAV total return (%) | MSCI Emerging Markets total return (%) | MSCI World total return (%) |
|---|---|---|---|---|
| 31/01/22 | (10.0) | (8.3) | (5.1) | 19.4 |
| 31/01/23 | (16.9) | (15.8) | (3.9) | 1.4 |
| 31/01/24 | (1.3) | (1.9) | (5.6) | 14.0 |
| 31/01/25 | 18.7 | 17.8 | 17.7 | 24.5 |
| 30/01/26 | 71.2 | 59.6 | 30.4 | 9.1 |
Source: Bloomberg, Marten & Co. Note: 1) The fund was managed by Genesis Investment Management prior to October 2021.
Fund profile
Fidelity took over management of the trust in October 2021.
Established in 1989, FEML invests across emerging and select frontier markets with the aim of achieving long-term capital growth. In October 2021, Fidelity International was appointed as manager, and the trust changed its name from Genesis Emerging Markets Fund. Since then, it has drawn on Fidelity’s global analyst network to build a high-conviction portfolio of long positions in companies the managers believe to be quality, alongside short positions. Investment is typically in listed companies, and the mandate allows the use of derivatives, giving the managers broad flexibility to express views and manage risk.
The lead manager of the portfolio is Nick Price, along with Chris Tennant as co-manager, who took over upon Fidelity’s appointment. Both are experienced emerging-markets specialists who leverage Fidelity’s on-the-ground research to source ideas and monitor risks. This resource is extensive, totalling around 50 analysts across different regions and sectors. Nick and Chris’s process is disciplined and repeatable, focused on fundamental, stock-specific research.
The managers employ an “extension” style of management that combines long positions in high-quality franchises with short positions in weaker businesses (sometimes through pair trades), which can both hedge risk and create additional upside. This approach allows gross market exposure to exceed shareholders’ funds, while typically keeping net equity exposure near 100% of total net assets. The trust has a diverse spread of market cap and sector exposure. Its long book is focused on companies with durable cash generation at reasonable valuations.
The MSCI Emerging Markets Index is FEML’s official benchmark. While the portfolio is constructed on a bottom-up basis, some consideration is given to the shape of the index, especially in relation to country weightings.
For investors seeking a research-driven, high-conviction approach to emerging markets within a closed-ended structure, FEML offers a different proposition from traditional long-only peers. The combination of active stock selection, selective shorting and gearing aims to capture emerging market growth while smoothing some of the market’s rougher edges.
Manager’s view & current themes
Any multi-country emerging markets fund will hold a wide variety of holdings, across different sectors and geographies. While the portfolio is constructed bottom-up, a number of themes are visible within the portfolio.
Artificial intelligence
The global equity market rally of recent years has been largely driven by excitement about the development of artificial intelligence (AI). However, the rally thus far has largely been focused on companies in developed markets, most markedly the “Magnificent Seven” mega-cap US technology names. What has been less-well understood is the extent to which artificial intelligence supply chains sit within emerging markets. This is most clearly the case with Taiwan Semiconductor (TSMC), but is also true further down the supply chain. Here, companies such as Elite Material – which makes copper-clad laminates used in printed circuit boards – are often found on more attractive valuations.
The technology-heavy Taiwanese equity market is cheaper than its US equivalent but has generally been more expensive than other emerging markets. However, the market turmoil that followed “Liberation Day” in April, when President Trump sent markets plunging by announcing swingeing tariffs, presented a good buying opportunity, with the market “limit down” on several days. The market has since recovered strongly.
Gold and copper
Nick and Chris have believed for some time that the market backdrop is conducive to positive performance for both gold and copper. Gold is supported by structural demand from both the retail market and central banks, buttressed by heightened geopolitical tensions. Gold miners look especially attractive, with cost rises limited given weak oil prices. The copper price is underpinned by its vital role in the energy transition and ongoing supply constraints.
The gold price has rallied very strongly since the beginning of 2024, and this has been a big driver of FEML’s strong performance. Nick and Chris have been active in repositioning their gold exposure, taking profits in companies that have done well and reinvesting into names that have underperformed. Even if the gold price were to fall, Nick and Chris believe that the companies in FEML’s portfolio would still be attractive due to their cheap valuations.
Although not as extreme, the price of copper also rallied in 2025. There is a link to artificial intelligence, as increased demand has been particularly driven by big growth in data centres, which require substantial energy. At the same time, the supply of copper is constrained.
China
China remains the most significant global emerging market, and the largest component of the index (see Figure 3). FEML’s managers avoid banks in the country, as they view the sector as overly challenged due to thin profit margins, squeezed earnings and concerns about asset quality. However, they are much more comfortable with exposure to technological leaders in the industrials sector and select consumer exposure, for example in experiences categories like music streaming. The most significant Chinese exposure is currently achieved through Naspers, which is actually listed in South Africa but which holds a large stake in Chinese internet business Tencent.
Financials
FEML’s managers are clear that their exposure to the financials sector is not a bet on the future direction of interest rates, as some of the portfolio’s companies – such as fintech – benefit from lower rates, while the likes of their Indonesian banks do better when rates are higher.
Instead, the investments are designed to benefit from structural growth. For example, holdings in Indian and Indonesian banks provide exposure to the expansion of the middle class in markets where many companies and sectors already command demanding valuations. Elsewhere, holdings such as Hungarian and Greek banks trade at a discount to both their peers and recent history, due to the country they are listed in, rather than their fundamentals.
Investment process
Nick and Chris also run the open-ended Fidelity FAST Emerging Markets Fund.
Nick and Chris run FEML alongside the Fidelity FAST Emerging Markets Fund. The latter was launched in 2011 with the same long-short strategy, thus providing a comparable long-term performance record. The two vehicles are managed in a very similar manner, though there are some minor differences. The open-ended fund has been managed by Nick (more recently alongside Chris) since its launch.
The trust is not subject to UCITs rules and can therefore hold more than 10% of assets in one holding (as with the current position in Taiwan Semiconductors), and there are some very small legacy holdings left from when Nick and Chris took over management from Genesis in 2021.
Figure 1: FEML’s research and investment process
Nick and Chris are supported by a large team of analysts, each covering 20-30 stocks.
FEML’s investment process draws on Fidelity’s broader resources, including the research team and Fidelity’s regional EM portfolios. Chris and Nick are supported by a large team of analysts, some of whom are in Asia and the remainder in the UK, each covering between 20 and 30 stocks. From this initial list, each regional emerging markets portfolio manager will filter their highest-conviction names into the relevant sub-portfolios as outlined in Figure 1. From these ideas, Chris and Nick will, after further work, select their favoured stocks for the FEML portfolio. In addition, the team will draw on the work of shorting analysts, including a dedicated emerging markets shorting analyst. Chris and Nick always have the final say on any investment decision, and there is no specific requirement for a stock to have first been held within one of the sub-portfolios, although typically it will have been.
FEML has a “go anywhere” approach. Its closed-ended structure allows it managers to look further down the market cap spectrum in search of the best opportunities, without needing to be concerned about the liquidity requirements of an open-ended fund. The focus is on holding quality names in the long book.
Quality in this context means companies generating superior and sustainable returns through the business and market cycle. Preferred names will generally have net cash on their balance sheet, deliver robust returns, display good corporate governance and protect minority shareholders. They will also screen well on valuation as well as quality.
The ability to short
FEML’s ability to short makes it unique in the emerging markets sector.
What makes FEML unique in the sector is that, alongside its long book, the managers also hold a series of short positions, whereby the fund gains from any fall in value of the holding. These shorts typically equal 30-35% of the portfolio’s total exposure. They are made up of a combination of one-off short positions and pair trades – in the case of the latter, a short position is paired with a long position in a correlated company.
The short book positions should be the mirror opposite of those in the long book. For inclusion, a company must meet two criteria: it must be in either fundamental or cyclical decline, and must have several red flags around its balance sheet. A new short position would not be initiated on valuation grounds alone; fundamental concerns with the balance sheet must be identified. Short positions typically do not exceed 100bps and average around 40bps.
A further advantage of the short book is that, although there is a broad aim for net exposure in the portfolio of around 100%, the short positions can be offset against further long holdings, thus extending long exposure to around 130-135%.
The specific identities of active short positions are not disclosed by the managers.
Asset allocation
As at 31 December 2025, FEML’s current gross market exposure was 157.1%, reflecting the portfolio’s short positions held alongside its long book. The net equity exposure was 106.9%.
As shown in Figures 2 and 3, FEML’s geographic exposure differs significantly from the index, illustrating that MSCI Emerging Markets is a reference index rather than a benchmark that constrains the managers. The portfolio’s active share was 129.9% for the year ended 30 June 2025.
Figure 2: FEML geographic allocation as at 31 December 2025*
Source: Fidelity Investment Companies. *Note: as a proportion of net assets
Figure 3: MSCI Emerging Markets geographic allocation as at 31 December 2025
Source: MSCI
However, some of the allocations in Figure 2 are slightly misleading. The very big overweight position to South Africa, FEML’s largest geographical weighting, is partly a reflection of the holding of Naspers, the fund’s second-largest individual position (see page 8). A significant proportion of the value of the holding is attributable to its stake in Chinese company Tencent. For the same reason, the seemingly significant underweight position to China is much less so on a look-through basis, after accounting for the Tencent exposure.
Away from China/South Africa, FEML has an overall underweight position to Taiwan; as explained, this market tends to trade on a higher multiple than other emerging markets and the managers believe there are better opportunities elsewhere, although they do see opportunities along the AI supply chain, and exposure has been increased in recent months. The fund is also underweight India and Korea, but overweight Brazil.
Figure 4: FEML sector allocation as at 31 December 2025*
Source: Fidelity Investment Companies. *Note: as a proportion of net assets
Figure 5: MSCI Emerging Markets sector allocation as at 31 December 2025
Source: MSCI
FEML has a small 1.3% negative net exposure to the utilities sector, due in part to relevant short positions. The largest absolute long allocation is to financials, with two of the fund’s top 10 holdings belonging to the sector (see Figure 6). The second-largest is IT, with an allocation that is broadly in line with the index. Materials is the third-largest, and also the largest overweight versus the index, reflecting the managers’ conviction towards the sector, particularly gold and copper.
Top 10 holdings
Figure 6: Top 10 holdings as at 31 December 2025
| Holding | Sector | Country | Allocation 31 December 2025 (%) | MSCI Emerging Markets Index (%) | Relative versus index |
|---|---|---|---|---|---|
| Taiwan Semiconductor | Information technology | Taiwan | 13.8 | 11.9 | 1.9 |
| Naspers | Consumer discretionary | South Africa | 7.8 | 0.5 | 7.3 |
| Pan African Resources | Materials | South Africa | 4.1 | 0.0 | 4.1 |
| Samsung Electronics | Information technology | Korea | 3.7 | 4.3 | (0.6) |
| OTP Bank | Financials | Hungary | 3.1 | 0.2 | 2.9 |
| Aura Minerals | Materials | Brazil | 3.0 | 0.0 | 3.0 |
| Contemporary Amperex Technology | Industrials | China | 3.0 | 0.2 | 2.8 |
| Sieyuan Electric | Industrials | China | 2.9 | 0.0 | 2.9 |
| TBC Bank | Financials | UK | 2.8 | 0.0 | 2.8 |
| Cia de Minas Buenaventura | Materials | Peru | 2.5 | 0.0 | 2.5 |
| Total of top 10 | 46.9 | 16.6 |
Sieyuan Electric
Figure 7: Sieyuan Electric (CNY)
Source: Bloomberg
Sieyuan Electric (www.sieyuan.com) is a Chinese grid equipment supplier, that is the only private company competing with a group of inefficient State-Owned Enterprises (SOEs). The company originated in high-voltage gas insulated switches, where it benefits from tight global supply/demand dynamics. However, thanks to the company’s private ownership model, which has allowed it to attract the best R&D engineers in the country, Sieyuan has rapidly expanded into new product lines. This has enabled it to capture a rising market share in a sector that is also growing very quickly.
FEML’s managers believe Sieyuan stands to benefit from continued rising demand, as the shift in global power generation and the build-out of renewables require extensive grid reinforcement.
TBC Bank
Figure 8: TBC Bank (GBP)
Source: Bloomberg
TBC Bank (www.tbcbankgroup.com) is a mid-cap Georgian banking group. Georgia has a population of just under 4m people and TBC is one of two dominant banks in the country, which together have about 80% market share. TBC Bank earns returns on equity of more than 25% but trades on only c.5x earnings, which Nick and Chris describe as a very cheap multiple for such a dominant, profitable bank.
TBC has just launched a digital bank in Uzbekistan, a market with a population 10 times the size of Georgia’s, offering huge scope for expansion. With an experienced CEO that has an excellent track record of running fintech companies, FEML’s managers believe this expansion into Uzbekistan offers great optionality.
Aura Minerals
Figure 9: Aura Minerals (CAD)
Source: Bloomberg
Aura Minerals (www.auraminerals.com) is a Brazilian gold miner which Nick and Chris describe as remaining relatively cheap despite the rally in the gold price this year. At current production levels, the company can generate a free cash flow yield of over 20% at gold prices as low as $3k/oz, well below today’s spot levels.
Aura’s capital expenditure levels are also high, although this can be funded out of cash whilst still maintaining a generous dividend, and production stands to double once the current project pipeline is complete.
Other notable holdings
Alfamart
Figure 10: Alfamart (IDR)
Source: Bloomberg
Alfamart (www.alfamart.co.id) is a leading Indonesian grocery retailer, predominantly in the minimarket space. The company is trading at a historical low, having recently derated to a price to earnings ratio of c.20x, against a backdrop of macroeconomic uncertainty in Indonesia and weak margins. However, FEML’s managers believe it has the potential to be a high-quality compounder over the long term.
Formal retail penetration remains low in Indonesia and, as a result, the company benefits from a decade-long runway of rolling out new stores, creating strong upside potential. Nick and Chris also believe Alfamart has a good competitive position, as the stronger player in a duopoly market.
Orizon
Figure 11: Orizon (BRL)
Source: Bloomberg
Orizon (www.orizonvr.com) is a waste management business, which operates landfill sites in Brazil. The company benefits from strong pricing power due to the local monopolies it holds, and FEML’s managers expect to see continued margin expansion from price negotiations in the coming years. In addition, landfill penetration in Brazil is currently around 60%, leaving significant room for volume growth in the sector as regulation around refuge treatment continues to tighten.
Orizon also has a significant opportunity to boost earnings by adding a biomethane capacity or via inorganic expansion, where it has the potential to acquire assets at very low multiples.
Kazatomprom
Figure 12: Kazatomprom (USD)
Source: Bloomberg
Kazatomprom (www.kazatomprom.kz) is one of the largest uranium miners in the world, with attributable output accounting for c20% of global production. It stands to benefit from the attractive supply/demand outlook for the metal, which should prompt a re-rating.
FEML’s managers believe that the rapid expansion of AI and data centre infrastructure will drive an unprecedented demand for energy, and nuclear power is one of the potential solutions to this growing demand. This in turn should support uranium prices. Kazatomprom is trading at a cheap multiple and pays out almost the entirety of its earnings in dividends, supporting strong shareholder returns.
Performance
Figure 13: FEML’s NAV total return relative to emerging market and global indices, over five years to 30 January 2026
Source: Bloomberg, Marten & Co
Figure 14: Cumulative total return performance over periods ending 30 January 2026
| 1 month (%) | 3 months(%) | 6 months (%) | 1 year (%) | 3 years(%) | 5 years(%) | |
|---|---|---|---|---|---|---|
| FEML NAV | 9.0 | 23.2 | 41.1 | 59.6 | 84.3 | 42.2 |
| FEML share price | 12.4 | 29.0 | 46.5 | 71.2 | 100.6 | 50.0 |
| MSCI Emerging Markets index | 6.8 | 4.9 | 19.6 | 30.4 | 44.9 | 32.3 |
| MSCI World index | 0.3 | (0.9) | 7.9 | 9.1 | 54.8 | 87.4 |
The fund’s current management was appointed towards the end of 2021. The driver of underperformance during 2022 was the overweight exposure to Russia at the time of the invasion of Ukraine in 2022. These positions were subsequently written down to zero given the lack of price discovery and the inability of foreigners to trade the market. Some have subsequently been disposed of by trading over the counter, while others remain. This was compounded by an underweight position to parts of the market that rallied at the time, such as the Middle East. However, FEML’s relative performance picked up subsequently, and the NAV has outperformed the index.
It is unsurprising to see FEML lagging the MSCI World Index since the managers took over. This index is dominated by the US equity market (currently over 70% of the total), which itself is dominated by mega-cap technology companies. These have performed extremely well over recent years, outperforming most other assets, while the performance of emerging markets has been more mixed.
Peer group
FEML sits in the global emerging markets sector, which currently has 11 members, although we have excluded Africa Opportunity on size grounds – it has a market cap of just £6m and we do not consider it to be a relevant comparator for FEML. Members of this sector will typically have:
- over 80% invested in quoted global emerging market shares;
- less than 80% in any single geographic area;
- an investment objective/policy to invest in global emerging market shares; and
- a global emerging market benchmark.
Peer group performance
Figure 15: Peer group cumulative NAV total return performance to 30 January 2026
| 1 month (%) | 3 months(%) | 6 months (%) | YTD (%) | 1 year (%) | 3 years(%) | 5 years(%) | FIL’s tenure*(%)1 | |
|---|---|---|---|---|---|---|---|---|
| FEML | 9.0 | 23.2 | 41.1 | 9.0 | 59.6 | 84.3 | 42.2 | 48.2 |
| Ashoka WhiteOak EM | 6.7 | 5.3 | 19.4 | 6.7 | 29.2 | – | – | – |
| Barings Emerging EMEA | 10.2 | 11.1 | 21.6 | 10.2 | 31.9 | 68.9 | 42.7 | 21.2 |
| BlackRock Frontiers | 6.8 | 9.4 | 15.6 | 6.8 | 19.9 | 52.6 | 99.5 | 70.3 |
| JPMorgan Emerging EMEA | 8.7 | 10.1 | 17.4 | 8.7 | 25.9 | 56.6 | (88.8) | (91.8) |
| JPMorgan Emerging Mrkts | 8.3 | 7.7 | 25.2 | 8.3 | 29.1 | 36.9 | 25.2 | 25.7 |
| JPMorgan Global EM Inc | 8.5 | 8.3 | 22.0 | 8.5 | 31.3 | 48.1 | 54.9 | 51.0 |
| Mobius | 5.8 | 4.2 | 11.2 | 5.8 | 3.2 | 19.3 | 45.8 | 13.7 |
| Templeton Emerging Mrkts | 12.7 | 11.0 | 31.1 | 12.7 | 49.0 | 73.2 | 49.0 | 65.2 |
| Utilico Emerging Markets | 5.9 | 9.4 | 16.9 | 5.9 | 23.5 | 40.4 | 69.1 | 49.1 |
| FEML rank | 3/10 | 1/10 | 1/10 | 3/10 | 1/10 | 1/9 | 7/9 | 5/9 |
| Sector arithmetic avg. | 8.3 | 10.0 | 22.1 | 8.3 | 30.3 | 53.4 | 37.7 | 28.1 |
| Sector arithmetic avg. exc. FEML | 8.2 | 8.7 | 20.3 | 8.2 | 27.3 | 49.9 | 37.2 | 25.8 |
As outlined in Figure 15, FEML’s short-term NAV performance, up to one year, is very strong versus the peer group, ahead of every other fund in the sector. Three-year performance is equally impressive, with FEML again the highest-ranked fund. The five-year number – which includes the period of Genesis’s management – is weaker. Since Nick and Chris took over the management, FEML ranks fifth out of nine funds.
Figure 16: Peer group comparison – size, fees, discount, and yield as at 26 November 2025
| Market cap (£m) | St. dev. of NAV returns over one year | Ongoing charges (%) | Perf. fee | Premium/ (discount) (%) | Dividend yield(%) | Gross gearing(%)3 | Net gearing(%)3 | |
|---|---|---|---|---|---|---|---|---|
| FEML | 450 | 13.9 | 0.83 | No | (9.8) | 2.0 | 70.9 | 61.3 |
| Ashoka WhiteOak EM | 56 | 14.1 | 1.90 | Yes1 | (0.9) | – | Nil | (7.5) |
| Barings Emerging EMEA | 89 | 23.4 | 1.70 | No | (14.6) | 2.2 | Nil | (1.8) |
| BlackRock Frontiers | 330 | 10.6 | 1.41 | Yes | (4.3) | 4.3 | 23.9 | 11.9 |
| JPMorgan Emerging EMEA | 115 | 52.5 | 4.17 | No | 344.6 | 0.2 | Nil | (2.7) |
| JPMorgan Emerging Mrkts | 1,303 | 14.6 | 0.79 | No | (8.5) | 3.8 | Nil | (2.7) |
| JPMorgan Global EM Inc | 431 | 10.8 | 0.96 | No | (9.5) | 3.5 | Nil | (0.2) |
| Mobius | 160 | 14.1 | 1.4 | No | (10.1) | 1.2 | Nil | (6.4) |
| Templeton Emerging Mrkts | 2,221 | 16.2 | 0.95 | No | (8.6) | 2.3 | 3.0 | (0.2) |
| Utilico Emerging Markets | 475 | 11.2 | 1.5 | No | (11.1) | 3.4 | 3.1 | 3.0 |
| FEML rank2 | 4/10 | 4/10 | 2/10 | 7/10 | 7/10 | 10/10 | 10/10 | |
| Sector arithmetic avg.4 | 563 | 18.1 | 1.56 | (8.6) | 2.5 | 10.1 | 5.5 | |
| Sector arithmetic avg.4 exc. FEML | 576 | 18.6 | 1.64 | (8.5) | 2.6 | 3.3 | (0.7) |
FEML is one of the larger emerging market trusts, although still some way behind the two giants of the sector, JP Morgan Emerging Markets and Templeton Emerging Markets.
FEML’s ongoing charges figure is very competitive against the rest of the sector. Like most of the funds in this peer group, it does not charge a performance fee.
In a sector where income payments are traditionally low, FEML’s yield is in the middle of the pack. The same can be said for the discount, with most of the sector trading on discounts in the high single- or low double-digits.
Both FEML’s gross and net gearing levels are well in excess of the rest of the sector; indeed, most of its peers have net cash positions. These high gearing levels are primarily due to the fund’s extension on the long and short side.
FEML’s volatility, measured by standard deviation of NAV returns, is in the middle of the peer group.
Dividend
FEML is primarily focused on generating capital growth. Any income generated is a secondary consideration and shareholders should not expect income to be a significant component of their returns. Nonetheless, income occurs naturally, and after allowing for costs that are charged to the revenue account, board policy is to pay out the majority of revenue earnings as a final dividend. This is usually paid in December of each year.
For the year ended 30 June 2025, FEML’s board has approved the payment of a final dividend of US$0.26 per share (2024: US$0.20 per share), which is equivalent to a yield of 1.6% on the trust’s share price of 1,198p per share as at 30 January 2026.
Figure 17: FEML revenue income and dividend by financial year (ended 30 June)
Source: Fidelity Emerging Markets Limited
The dividend paid in 2025, although 30% higher than the previous year, was fully covered by revenue. As illustrated in Figure 17, dividends in previous recent years had exceeded revenue income, but the longer-term trend has been one of paying a covered dividend. This has allowed FEML to build up a revenue reserve. As at 30 June 2025, this reserve stood at US$59.1m or US$0.9185 per share (30 June 2024: US$51.3m or US$0.6877 per share).
Premium/(discount)
As shown in Figure 18, FEML moved to a markedly wider discount from late 2021, as emerging-market equities fell out of favour just as global interest rate expectations rose, and the fund underwent a major manager change alongside an over-subscribed tender offer. The discount then narrowed, but it subsequently widened more dramatically in the immediate aftermath of Russia’s invasion of Ukraine. More recently, there has been a narrowing of the discount, particularly over the course of 2025, such that it has generally been less than 10% in recent months. The average over the past 12 months has been 9.5%, within a range of 5.7% to 12.4%. With the trust trading on a discount of 8.1% as at 30 January, it is clearly at the narrower end of that recent range.
Figure 18: FEML premium/(discount) over five years to 30 January 2026
Source: Bloomberg, Marten & Co
The company has an aim of keeping the trust’s discount to single digits, and to this end has been active in buying back shares. FEML’s most recent tender offer was in March 2024, and the monthly share repurchases since then are shown in Figure 19. These have totalled 22.0% of the total share capital over this period, and the board intends to continue with this buyback strategy in future.
Figure 19: FEML share buybacks and issuance
Source: Fidelity Emerging Markets Limited
Strathclyde Pension Fund sale
Following an EGM held on 24 October, the board of FEML announced that shareholders had given their approval for the company to repurchase 16,441,177 shares, or 25% of the fund, from Strathclyde Pension Fund, the second-largest shareholder. The process was completed on 13 November 2025 at a discount of 14% to NAV, against a prevailing market discount of 9.8% on that day.
Strathclyde’s holding was a legacy of FEML’s previous management by Genesis. The sale resulted in an approximate 4.5% uplift to NAV for remaining shareholders.
Capital structure
FEML is a Guernsey-incorporated closed-end investment company. It has two share classes – “founder shares” and “participating preference shares” – and the participating preference shares have a premium listing on the London Stock Exchange (the founder shares were created at FEML’s launch in 1989 to ensure compliance with Guernsey company law at the time, but unlike the participating preference shares, the founder shares carry no economic rights and do not participate in the company’s profits, assets, or dividends). The founder shares were transferred to FIL Investment Services (UK) Limited on 7 October 2021 and their only function is to give the holder limited voting rights on matters that would affect the existence of the class itself. They do not dilute or affect the rights of participating preference shareholders in any way.
Gearing
FEML is permitted to borrow, although net gearing is capped at 10% of net assets and it aims to keep the use of its overdraft facility for trading purposes to a minimum. As at 31 December 2025, FEML had net gearing of 6.9% of net assets. Gross gearing was much higher at 57.1% due to the short equity positions alongside the long book.
Major shareholders
FEML has a significant institutional presence on its share register.
Figure 20 illustrates that FEML has a strong institutional element within its share register.
Figure 20: Major shareholders as at 31 December 2025
Source: Bloomberg, Marten & Co.
Unlimited life with a five-yearly continuation vote
FEML has no fixed life, but as part of the change of management arrangements in 2021, the company committed to providing shareholders with a continuation vote in 2026 and every five years thereafter. This will take place at the AGM in December.
There is due to be a conditional tender offer in September 2026. This will allow for a tender of up to 25% of shares if the fund has underperformed over the preceding five years. The calculation date is at end September. If the NAV total return for the five years ending 30 September 2026 does not exceed the benchmark index, the company will make a tender offer for up to 25% of the shares in issue (excluding shares held in treasury) at that time. As at end December 2025, the fund was more than 8% ahead of the benchmark over the tender period to date in GBP terms.
Financial calendar
FEML’s financial year-end is 30 June. The annual results are usually released in October (interims in March) and its AGMs are usually held in December of each year – this year’s is on 1 December. As discussed earlier, FEML pays one final dividend a year in December after its approval at the AGM.
Fees and costs
Under the management agreement, the investment manager is entitled to receive a management fee of 0.6% of net asset value. The management fee is calculated and charged daily and payable monthly in arrears.
Management team
Nick Price (portfolio manager)
Nick set up Fidelity’s Emerging EMEA group in 2005.
Nick Price established Fidelity’s Emerging EMEA group in 2005 and developed the investment process that has since become the cornerstone of Fidelity’s emerging markets equity strategies. This process was rolled out globally in 2009, and in 2011 Nick launched the FAST (Fidelity Active STrategy)-Emerging Markets strategy, which he continues to lead today, and is effectively a mirror of FEML, and provides a longer-term track record.
Nick joined Fidelity in 1998 as a research analyst covering pan-European sectors before becoming assistant portfolio manager of the European Growth Fund in 2004. Earlier in his career he worked in London with SBC Warburg, Daiwa Europe Bank and JP Morgan, having started as an auditor with Price Waterhouse in Johannesburg. He holds a Bachelor of Commerce and Diploma in Accounting from the University of Natal, is a member of the South African Institute of Chartered Accountants, and is a CFA charterholder.
Chris Tennant (co-portfolio manager)
Chris has spent his entire career at Fidelity, joining in 2011 as an equity analyst covering European transportation. He moved to the London-based emerging markets team in 2012 to focus on EMEA and Latin American metals and mining. In 2015, he took on a newly created role as EM shorting analyst, working closely with Nick to develop the short book, initially concentrated on EMEA and Latin America.
Chris was appointed assistant portfolio manager on the FAST-Emerging Markets strategy in 2019 and was promoted to co-portfolio manager in 2021. He serves on the Emerging EMEA and Latin America equities portfolio management teams. Chris holds a Master’s degree in engineering from Imperial College.
Board
FEML’s board currently comprises five directors, all of whom are non-executive and considered to be independent of the investment manager. FEML’s articles of association require that newly appointed directors offer themselves for election at the next AGM. It is board policy that all directors retire and offer themselves for re-election at each AGM.
The average length of service is 5.1 years, with Katherine Tsang, the longest-serving, having 8.4 years of service under her belt. Other than FEML’s board, its directors do not have any other shared directorships. The company’s articles of association limit the aggregate fees payable to the directors to a total of US$400,000 per annum. The average fee rates for the individual director positions for the current financial year have increased by 3.9% over FY24.
Figure 21: Board member length of service and shareholdings
| Director | Position | Date of appointment | Length of service (years) | Annual fee (GBP) 1 | Shareholding2 | Years of fee invested3 |
|---|---|---|---|---|---|---|
| Heather Manners | Chairman | 5 May 2022 | 3.6 | 52,000 | 10,000 | 1.9 |
| Mark Little | Chair of the audit committee | 17 January 2024 | 1.9 | 39,500 | 3,869 | 1.0 |
| Torsten Koster | Senior independent director | 1 July 2020 | 5.4 | 39,500 | 15,000 | 3.8 |
| Dr Simon Colson | Director | 1 July 2019 | 6.4 | 37,500 | 4,416 | 1.2 |
| Katherine Tsang | Director | 19 July 2017 | 8.4 | 37,500 | 8,000 | 2.1 |
| Average (service length, annual fee, shareholding, years of fee invested) | n/a | n/a | 5.1 | 41,200 | 8,257 | 2.0 |
Recent share purchase and disposal activity by directors
All of FEML’s directors have personal investments in the fund.
Since the middle of 2024, there have been three purchases by FEML directors of the company’s shares – all of which were by directors who did not previously have a stake. Mark Little purchased 2,850 shares at £7.01 per share on 14 October 2024 and 1,019 shares at £9.82 on 8 October. Katherine Tsang purchased 8,000 shares at £6.80 per share on 6 November 2024. There have been no sales of shares by directors in the same period. As illustrated in Figure 21, all of FEML’s directors now have personal investments in the fund, which we consider to be favourable as it helps align directors’ interests with those of shareholders. The average interest is equivalent to 1.9 years of their fees.
Heather Manners (chairman)
Heather joined FEML’s board in May 2022 and became chairman in December 2022. She has 34 years’ experience of investment in Asia, and for the past 15 years as the co-founder, CEO and CIO of Prusik Investment Management. Heather began her career at Henderson Global Investors Limited where latterly she was head of Asia and emerging markets. Heather is also a non-executive director of Montanaro Asset Management and Collidr Asset Management. She was previously a non-executive director of Aberdeen New Dawn Investment Trust Plc.
Mark Little (chairman of the audit committee)
Mark is a chartered accountant with extensive financial services experience in fund management, research and private banking. He also has a strong understanding of compliance and regulation in the modern financial services world. Mark began his career as a fund manager with Scottish Widows Investment Management after qualifying as a chartered accountant with Price Waterhouse in 1991. He subsequently worked as global head of automotive research for Deutsche Bank and joined Barclays Wealth in 2005, where he became Managing Director of Barclays Wealth (Scotland and Northern Ireland).
Mark is a non-executive director and chairman of the audit committees of BlackRock Smaller Companies Trust Plc, Majedie Investments Plc and Abrdn Equity Income Trust Plc. Previously, he has been a non-executive director and chair of the audit and risk committee of STS Global Income & Growth Trust Plc, managing director, Scotland & Northern Ireland at Barclays Wealth (formerly Gerrard) and global head of automotive research at Deutsche Bank. Mark is an Accountancy and Economics graduate from Aberdeen University.
Torsten Koster (senior independent director)
Torsten has over 30 years’ experience working for large multi-national companies. He spent two periods at Nestle SA – between 1991 and 1997 and then from 2003 to 2016 – and, during his second term, held the positions of chief financial officer Nestle Russia & Eurasia between 2007-2011 and chief financial officer Nestle Nespresso SA from 2011 to 2016.
Torsten was also chief financial officer at Lukoil SA between 1998 and 2000 and subsequently at ELCA lnformatique SA between 2000-2003. In 2016, he founded his own consultancy business, Baussan Concept SA, which specialised in providing due diligence and portfolio services to European and US based private equity firms.
Torsten has held a number of Board position including being a director of SodaStream International from 2016-2018, vice chairman of Natra SA, Spain from 2019-2022. He is currently chairman of the Board of Banque Heritage SA and director of ECOM Agroindustrial SA, both of which are unlisted companies. Torsten holds a Master’s degree from HEC Lausanne and is a resident of Switzerland.
Dr Simon Colson (director)
Based in the UK, Simon has over 30 years’ experience in financial markets, working in investment banking, investment management and financial consulting. From 1995-2001, he was managing director, Deutsche Bank AG London, in charge of closed-end fund origination and distribution. In previous roles Simon was responsible for the launch, restructuring and repurposing of a significant number of investment companies and, from 2002-2005, was a non-executive director of The Association of Investment Companies.
In 2002, Simon started his own FCA regulated consulting and distribution business which raised assets for emerging managers across a range of traditional and alternative asset classes – including closed-end funds. Since 2017, he has focused on unregulated advisory and non-executive work and is currently a non-executive director of the Children’s Liver Disease Foundation. Simon is a qualified medical doctor and holds an MBA in Finance & Investment from Bayes Business School (City St George’s, University of London).
Katherine Tsang (director)
Prior to her retirement in 2014, Katherine spent 22 years with Standard Chartered Bank, latterly in the role of Chairperson of Greater China. Following her retirement, Katherine founded Max Giant, which trades in different markets as well as making direct investments in Asia.
Katherine is based in Hong Kong and is currently an independent non-executive director on the Board of China CITIC Bank International Limited and Budweiser Brewing Company APAC Limited. She also serves as a member of the Advisory Council for China of the City of London, and is an honorary Board member of Shanghai Jiao Tong University. Katherine has previously served as an independent non-executive director of Gap Inc., and Baoshan Iron & Steel Co. Limited, a member of the World Economic Forum’s Global Agenda Council on China, and a member of Sotheby’s Advisory Board.
SWOT analysis
Figure 22: SWOT analysis for FEML
| FEML is unique in the sector in taking short positions alongside the long book, allowing investors to potentially profit from both ends of the quality spectrum. | FEML has previously had to write off a portion of its portfolio, the Russian assets in 2022. Given the higher risk nature of emerging markets investing, risk of unforeseen events is ever-present, albeit the managers have indicated the process enhancements they have made in recent years regarding management of country risk. |
| The investment process is demonstrably strong, with the managers supported by a large team of analysts. | |
| FEML’s gearing is achieved using CFDs. These are an efficient, cost effective and flexible form of financing and enable the portfolio manager to be nimble in the deployment of gearing. | |
| FEML’s fee structure is competitive, ranking 2nd lowest in the peer group |
| Emerging markets are currently enjoying a very positive period of performance, with signs that this will continue, given a weakening US dollar and appealing valuations, despite the rally. | Emerging markets are volatile |
| Emerging markets tend to be dynamic, with new themes becoming investable over time, and therefore the opportunity set expands. | The US dollar experienced a period of weakness last year. This may not continue, and any period of dollar strength is generally negative for emerging markets. |
| Emerging markets are sensitive to interest rates, due to capital flows, particularly in Asia. |
Source: Marten & Co
Bull vs bear case
Figure 23 :Bull vs bear case for FEML
| Performance | FEML’s performance this year has been strong in both absolute and relative terms. The same can be said for three-year performance. | Five-year numbers are less robust (noting that Fidelity took over management in October 2021), with FEML’s performance particularly struggling in 2022. |
| Dividends | FEML is primarily focused on generating capital growth. An annual dividend is paid given that income from the portfolio occurs naturally. | FEML’s modest dividend makes it unsuitable for income-seeking investors. |
| Outlook | Emerging markets are currently enjoying a period of positive performance, underpinned by a strong macro environment. This could well continue through 2026. | Bull markets in emerging markets can turn into bears very quickly. Emerging markets are often sensitive to global economic output due to their particular reliance on exports. The likelihood of a turnaround is increased by the uncertain policy environment in the US, which could have severe knock-on effects. |
| Discount | FEML’s Board continues to be proactive in repurchasing shares, aiming to keep the discount in single digits under normal market conditions. |
FEML has traded on a discount for a number of years, and the current discount could widen back to double digits if conditions and/or performance deteriorate. |
Source: Marten & Co
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