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

University spin-outs: where to find companies involved in cutting-edge science
Share tips

University spin-outs: where to find companies involved in cutting-edge science

Universities are innovation incubators and often launch businesses involved in fast-growing fields ranging from biotechnology to artificial intelligen…
24 Sep 2021
Russia's rigged election won’t rattle investors
Emerging markets

Russia's rigged election won’t rattle investors

Russian stocks are soaring, despite last week’s blatantly rigged election.
24 Sep 2021
Investing in football clubs: how you can profit from the beautiful game
Share tips

Investing in football clubs: how you can profit from the beautiful game

Football clubs may often be money pits for oligarchs, but they are also huge global brands, says John Chambers – and investors are now starting to rec…
24 Sep 2021
Share tips of the week – 24 September
Share tips

Share tips of the week – 24 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
24 Sep 2021

Most Popular

Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021
The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021