Go global with the Genesis Emerging Markets Trust

The Genesis Emerging Markets Trust believes in thorough fieldwork when seeking out promising investments.

Vinamilk carton © Vinamilk
Vietnam's biggest dairy company, Vinamilk, is a key holding

The Genesis Emerging Markets Trust believes in thorough fieldwork when seeking out promising investments.

"A desk is a dangerous place from which to view the world" warned John le Carr. Yet most fund managers spend a huge amount of time staring at Bloomberg screens, even though the same information and analysis is equally available to tens of thousands of other investors. It therefore rarely adds value.

The team at Genesis Investment Management, specialists in emerging-market equities, is different. The 12 members of the investment team share just one screen. They spend most of their time visiting companies, talking to management and canvassing the views of customers, suppliers and competitors in short, seeking original insights into investment opportunities.

A way in for retail investors

Genesis does, however, manage an investment trust, Genesis Emerging Markets (LSE: GSS) with £1bn of assets, providing an access point for retail investors. Since the shares trade on an 11% discount to asset value, retail investors can invest on better terms than the large institutional clients and a dividend yield of nearly 2% provides a bit of income.

Long-term performance has been excellent, with an annualised net investment return since launch in 1989 of 11.6%, 2% ahead of the benchmark emerging markets index. Returns in the last year of 13.5%, nearly 10% ahead of the index, have been outstanding.

This followed a few years of mild underperformance. Arguably, Genesis's collegiate style, reminiscent of academia rather than the Darwinian world of finance, prevented prompt action to correct flaws in investment thinking, but performance has since caught up fast. That does not imply that GSS takes a lot of risk quite the reverse.

A worldwide footprint

Mostly, though, the team concentrates on "long-term investment in good-quality businesses with a sustainable competitive advantage and an attractive valuation," according to Andrew Elder, managing partner. The quality bias means that the portfolio is more expensive than the index (18 times earnings against 12.6), but has a higher return on equity (18.6% compared with 15.8%). Exposure to companies controlled by the state is low, while there is a skew towards consumer stocks, such as Alibaba, New Oriental Education and Vinamilk.

Genesis, then, is not simply relying on the superior economic growth of emerging economies to deliver a favourable tailwind. It works hard to establish a constantly expanding list of opportunities, some of which will turn out to be great investments. These simply cannot be analysed by inexperienced investors thousands of miles away with universally available information. Genesis provides a role model for how it should be done.

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
If you think now is a good time to buy, look at these investment trusts
Investment trusts

If you think now is a good time to buy, look at these investment trusts

With the latest market slides, an awful lot of assets are beginning to look very cheap indeed. If you are thinking of buying, Merryn Somerset Webb has…
10 Mar 2020
How to build a properly diversified investment trust portfolio
Sponsored

How to build a properly diversified investment trust portfolio

Max King explains how to build a well diversified portfolio using one of our favourite tools – investment trusts.
25 Feb 2020
Why investment trusts are the best vehicle for your money
Sponsored

Why investment trusts are the best vehicle for your money

Max King explains the advantages of investment trusts – sometimes called closed-ended funds – over their open-ended counterparts (or Oeics).
11 Feb 2020

Most Popular

Oil producers are back at their Covid-19 lows – is it time to buy?
Oil

Oil producers are back at their Covid-19 lows – is it time to buy?

With demand for oil hammered by Covid-19 and talk of “peak oil demand”, there are lots of good reasons to be bearish on oil producers. So, asks John S…
22 Sep 2020
The rising dollar is proving bad news for most other assets – will it last?
Investment strategy

The rising dollar is proving bad news for most other assets – will it last?

Precious metals, stocks and pretty much every other asset has taken a tumble as the US dollar strengthens. Dominic Frisby looks at how long this trend…
23 Sep 2020
Why you should stuff your end-of-pandemic portfolio with Chinese stocks
China stockmarkets

Why you should stuff your end-of-pandemic portfolio with Chinese stocks

For an end-of-pandemic portfolio, you need assets that can cope with today’s volatility. And that, says Merryn Somerset Webb, means Chinese stocks.
14 Sep 2020