London, UK, 30 October 2018
Edison initiates coverage on Genesis Emerging Markets Fund (GSS)
Genesis Emerging Markets Fund (GSS) was launched in July 1989, making it one of the first emerging markets funds to be listed in the UK. It seeks to generate long-term capital growth, primarily through investing in emerging and frontier markets equities. With few constraints relative to the benchmark MSCI Emerging Markets index, the investment approach is bottom-up and focused on high-quality companies that trade on reasonable valuations. The manager believes income convergence with developed economies, and a rapidly growing middle-class, creates compelling long-term opportunities for the asset class. In the nearer term, the manager is finding attractive entry points for investments following a c 20% correction of the benchmark index since January 2018. The board has recently increased its efforts to promote GSS, including a resumption of distributions, while a tender offer was successfully completed in August 2018. The fund's 13.5% discount to cum-income NAV is at the lower end of the peer group range, suggesting there is scope to narrow over time.
GSS currently trades at a 13.5% discount to cum-income NAV, which is wider than its three-year average of 12.4%. The sell-off of emerging markets equities this year has afflicted the whole peer group, suggesting the asset class is unloved. A recovery in sentiment for the asset class and the success of the board's measures to promote GSS could support a narrowing of the discount over time.
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