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

Vinamilk carton © Vinamilk

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

The income investor’s dilemma
Income investing

The income investor’s dilemma

Pay attention to dividend growth as well as initial yield when picking income trusts, says Max King.
4 Jul 2022
Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Share tips of the week – 1 July
Share tips

Share tips of the week – 1 July

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
1 Jul 2022
How to invest in copper, the most important metal in the world
Industrial metals

How to invest in copper, the most important metal in the world

As the world looks to electrify and try to move away from fossil fuels, copper looks set to be the biggest beneficiary. But how can you invest? Rupert…
30 Jun 2022

Most Popular

UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
How to invest in copper, the most important metal in the world
Industrial metals

How to invest in copper, the most important metal in the world

As the world looks to electrify and try to move away from fossil fuels, copper looks set to be the biggest beneficiary. But how can you invest? Rupert…
30 Jun 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022