The board of Genesis Emerging Markets Fund Ltd. intends to appoint Fidelity International as investment manager, replacing 30-year incumbent Genesis Investment Management.
The board of the £1.2 billion ($1.7 billion) GEMF — a closed-end investment fund — also wants to update the investment policy to allow for investment in a diversified portfolio of equity, equity-linked securities and derivative instruments, giving exposure to certain companies in emerging markets, a regulatory filing said. Under the proposal, the name of the company would be changed to Fidelity Emerging Markets Ltd. Changes are subject to shareholder and regulatory approvals.
The company's board said benefits of the changes for shareholders include access to Fidelity's emerging markets strategy and will result in a significant reduction in management fees.
Fidelity has also agreed to dedicate "significant marketing resources to the promotion of the company," the filing said.
"Following a thorough review of its investment management arrangements and after considering a range of strong candidates in a competitive process, it was clear to the board that Fidelity has the depth of expertise in emerging markets and in the management of investment trusts, and that the company would also benefit considerably from Fidelity's brand, and its ability to attract new shareholders with its significant marketing resource," said Helene Ploix, chairwoman of Genesis Emerging Markets Fund Ltd., in the filing.
Fidelity would replace Genesis Investment Management, which has run the assets for more than 30 years. "Following long discussions with Genesis, the board fully understands and appreciates Genesis' focus on its institutional mandates," the filing said.
Fidelity had $740 billion in assets under management as of March 31.
In a statement provided by a spokeswoman, Genesis Investment Management said the use of derivatives and shorting — as proposed by the board under a contract with Fidelity — "is a significant change and not one that Genesis would wish to replicate."
The statement acknowledged that Genesis has a strong position in the institutional market and a commitment to a single investment strategy. "Genesis' focus on prioritizing investment performance and its careful approach to capacity management does not align well with the board's wish to refocus GEMF to target retail investors more overtly," the statement said.
The changes will be put to shareholders at an extraordinary general meeting in August.
