Genesis Emerging Markets Fund (GSS.L) – Upcoming Tender Offer – 7% Upside

Current Price: £9.03

Offer Price: £9.62

Upside: 7%

Expiration Date: TBD

Press release


Genesis Emerging Markets intends to launch tender offer for 25% of its outstanding shares at 98% NAV price. Based on the most recent NAV of £9.82/share, tender consideration stands at £9.62/share – 6.5% upside to current prices. The offer is conditioned on shareholder approval. The meeting is planned for next month and the tender is likely to be launched shortly after that. Current discount to NAV is equivalent to the average over the last year, thus even if the tender is prorated, I would expect shares to trade at a similar discount to NAV post tender.

GSS focuses on emerging markets (mostly Asia and Russia) and has a fairly strong historical correlation to MSCI Emerging Markets index, so NAV exposure could be effectively hedged by shorting $EEM.

The tender offer will be launched in fulfillment of GSS obligation to buy back shares if the fund did not outperform the benchmark (MSCI Emerging Markets index) over 5 years ending on the 30th of June’21. The benchmark was missed by only 1%. At the moment, the company intends to change its investment manager to Fidelity (shareholders will also vote on this in August). The management fee is expected to decrease from 0.9% to 0.6%. Additionally, Fidelity agreed to a 9-month fee waiver. The upcomig transition to a much bigger name investment manager with lower fees might incentivize shareholders not to tender their shares.

Discount to NAV:

GSS discount

Correlation with MSCI EM index:



  • City of London Investment Management – 28%;
  • Strathclyde Pension Fund – 22.2%;
  • Lazard Asset Management – 12.1%;
  • 1607 Capital Partners – 3.44%.

Portfolio information:

gss fund


12 thoughts on “Genesis Emerging Markets Fund (GSS.L) – Upcoming Tender Offer – 7% Upside”

  1. EGM date has been set on or around 1 October, and tender offer (subject to EGM approval) pricing and closing is expected in mid October.

    “Further to its announcement on 1 July, the Company expects to hold an extraordinary general meeting on or around 1 October 2021 (the “EGM”) to approve matters relating to the appointment of FIL Investment Services (UK) Limited as its new manager, with FIL Investment Services (UK) Limited taking over the management of the Company shortly thereafter.

    The Company also expects to commence its tender offer for up to to 25 per cent. of its participating preference shares in early September, at the same time as the dispatch of the notice of the EGM. The tender offer will be conditional on shareholder approval being approved at the EGM, with the tender offer closing, and the tender price being calculated following the EGM in mid-October 2021. ”

    • All resolutions were passed.
      “The resolutions included approval of the repurchase of up to 25 per cent. of the Company’s participating redeemable preference shares (the “Shares”) in issue (excluding any Shares held in treasury) pursuant to the tender offer commenced on 6 September 2021 (the “Tender Offer”). The Tender Offer will remain open until 1.00 p.m. on 15 October 2021. ”

      • I am very new to this one. Does the fact that this tender is restricted to 25% justify the reasonably steep discount of the share price to NAV (take out price)?
        In other words, are investors only expecting 1 out of every 4 shares they hold to be redeemed?

      • That is only if 100% of total outstanding shares participate in the offer. Lower participation results in more shares getting accepted.

  2. Below are the current discounts to NAV of other five London-listed Fidelity investment trusts (figures taken directly from their website).
    The post-tender discount of FEML is likely to be similar to the first two (FAS and FCSS).
    Fidelity Asian Values (FAS) 3.5%
    Fidelity China Special Situations (FCSS) 10.3%
    Fidelity European Trust (FEV) 6.7%
    Fidelity Japan Trust (FJV) 6.6%
    Fidelity Special Values UK (FSV) 3.4%

    • After the tender, the discount to NAV for FEML stays at unusually high level of 12.3%, vs the other five Fidelity investment trusts:

      Fidelity Asian Values (FAS) 4.9%
      Fidelity China Special Situations (FCSS) 7.2%
      Fidelity European Trust (FEV) 6.6%
      Fidelity Japan Trust (FJV) 6.7%
      Fidelity Special Values UK (FSV) 1.7%

  3. The Fidelity team led by Nick Price has taken over the reins.

    He states that “Completing the changes to the portfolio will therefore take several weeks”.

    So by the time NAV for redemption value is calculated for 18 Oct, the portfolio transition should have been largely completed.

    He is also adjusting portfolio in preparation for the 25% redemption. Maybe getting rid of those less liquid positions.
    “Our thoughts now turn to the future and to realigning the portfolio, at the same time as preparing to liquidate positions to fulfil redemptions as part of the tender offer. ”

    The new portfolio will likely be very similar to the Fidelity FAST Emerging Markets Fund (FAST EM), which is also managed by Mr. Price.

    He says the closed-end structure will allow him to buy smaller companies and non-listed companies.

    Similar to FAST EM (200% gross exposure, 150% long, 50% short), he says the new portfolio will also employ long/short strategy.

    For hedging purpose, I think EEM should still be able to approximate, but ideally one would want to add more hedge for Russian exposures.

    FAST EM is significantly overweight Russia, at 19.9% vs 3.9% for EEM vs 6.5% under Genesis.

    So maybe 84% EEM + 16% RSX.

    P.S. FAST EM also has unusually OVER-weight exposure to Kazakhstan at 5.5%.

  4. City of London Investment Management (CLIM) last week stepped up its FEML stake by 1.74% (2.09 million shares or ~$24 million) to 29.74%.

    Not sure how this move reflects on its tender intention.

    It may suggest CLIM is less likely to tender, because otherwise why did it add to its FEML position?

    On the other hand, if CLIM would like to take advantage of this arb opportunity but maintaining exposure, then adding some more FEML prior to the tender could be part of a paired trade it’s executing (i.e., adding FEML + shorting EEM –> then tender some FEML shares and close EEM short after 18 Oct)

  5. A whopping 85% of outstanding shares were tendered.

    If I understand the tender results correctly, if one tenders all of his shares, he will have 27.625% (=25%+75%*3.5%) of his tendered shares accepted.

    “Following a scale back exercise, Eligible Shareholders who validly tendered a percentage of Shares greater than their Basic Entitlement will have a number of Shares equal to their Basic Entitlement purchased in full plus approximately 3.50 per cent. of their Excess Applications, in accordance with the process described in the circular announcing the Tender Offer.”

  6. Tender price is set at 932 pence per share, and settlement of the Tender Offer will occur on or around 22 October (Friday).

    “Further to the tender offer launched by the Company on 6 September 2021 (the “Tender Offer”), the Company today announces that the Tender Price at which all participating redeemable preference shares (the “Shares”) accepted in the Tender Offer will be acquired is £9.3200 per Share.

    It is intended that settlement of the Tender Offer will occur on or around 22 October 2021, and that the Tender Offer consideration will be despatched to tendering shareholders as soon as practicable thereafter.”


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