Fund Profile

Fidelity Emerging Markets 27 December 2023

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Fidelity Emerging Markets . The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
FEML’s truly active approach and go-anywhere mandate differentiate it from peers in the sector…
Overview

Fidelity Emerging Markets Limited (FEML) benefits from the experience of portfolio managers Nick Price and Chris Tennant, who have been investing in emerging markets for most of their respective careers. Through the FEML portfolio they take a go-anywhere approach within the emerging markets space, looking for on- and off-benchmark stocks across each sector, market cap and geography, including frontier markets - these are all fair game. They can also use derivatives to go long or short.

Nick and Chris point out that emerging-market businesses are currently sitting at attractive valuations versus history, as well as relative to their developed market counterparts. At present the managers argue there are opportunities across emerging markets, including Mexico, which is set to benefit from nearshoring, and in China, where many high-quality stocks have disproportionately derated (see Portfolio section). In 2023 the managers have been building higher conviction positions, given the valuations and the opportunity set they see, remaining disciplined in their process while doing so. They continue to identify, in their view, best-in-class emerging-market businesses, as well as make use of a broad set of tools, such as the ability to take out short positions, to help generate multiple sources of returns.

At the time of writing, FEML trades at a discount of 11.7% and the board has unveiled a package of measures aimed at narrowing it (see Discount).

Analyst's View

We think FEML is a good way to access emerging markets and is well suited to provide diversification to a broader portfolio focused on developed markets. Its flexibility to take out both short and long positions is unmatched in the AIC Emerging Markets sector, making FEML a highly differentiated proposition versus others. The experienced managers who are well versed in the complexities of emerging markets, along with a team of emerging market analysts, gives it an edge when it comes to stock selection, in our opinion (see Management section). Given FEML’s Discount, we think it may be at an attractive entry point for long-term investors who want exposure to emerging markets. The board is active in its efforts to narrow the discount, which, if coupled with good performance, could generate powerful returns for investors.

The managers think that emerging markets are currently full of opportunities, propelled by long-term structural drivers and historically low valuations. They see opportunities in multiple regions, including in Latin America, given the proactivity of many governments when raising interest rates to combat inflation, and also the potential benefits of ‘nearshoring’ for economies like Mexico. Smaller, less well-covered regions are also throwing up opportunities in the small- and mid-cap space, including in Vietnam and emerging eastern Europe.

Bull

  • Deep resources and an on-the-ground research team is an advantage with stock selection
  • An attractive discount versus history and peers, with the board active in seeking to narrow it
  • Extensive resources on the long and short side, including highly experienced managers

Bear

  • Poor economic news could lead to weaker appetite for emerging market equities and could weigh on the discount in the near term
  • Political risks remain high in many key emerging markets, such as China
  • A highly active approach can lead to underperformance when positions don’t work
Continue to Portfolio

Fund History

10 Jul 2024 Things can only get better
Discounts are yawning but markets are thawing and boards are on the offensive; Labour might not be the only thing making a comeback this year...
12 Jun 2024 The long and short of it
FEML’s Polish investments show the attractive potential the trust offers – as well as the managers’ unique approach to markets…
17 May 2024 Foot on the brakes
The US will struggle to stop China…
19 Apr 2024 Fidelity Emerging Markets update, with Chair Heather Manners
In this short update, we speak to Heather Manners, Chair of Fidelity Emerging Markets (FEML)....
14 Feb 2024 Rise of the Machines
We look at some potentially exciting technology themes outside of the AI realm and share ways for investors to gain exposure without the hefty price tag…
31 Jan 2024 From Athens to Almaty
FEML’s flexible approach to markets means the trust is well positioned for the year ahead…
26 Jan 2024 Heading to the polls
We look at elections around the world and what they mean for investors…
29 Dec 2023 This time it’s different
Emerging markets have a very different decade ahead…
27 Dec 2023 Fund Analysis
FEML’s truly active approach and go-anywhere mandate differentiate it from peers in the sector…
17 Nov 2023 Around the world in emerging markets
FEML's unparalleled research team has helped deliver strong outperformance...
20 Sep 2023 Five questions about emerging markets
We track key developments in the diverse emerging markets universe…
31 Aug 2023 Low valuations meet big opportunities in emerging markets
After a tumultuous period, the prospects for emerging markets are looking up…
09 Jun 2023 Far out
When considering reshaping your portfolio, don’t overlook emerging markets…
02 Jun 2023 Fund Analysis
FEML offers access to a strategy with a great long-term track record…
28 Apr 2023 Will we see a resurgence in emerging markets?
We may be at the start of a new cycle…
View all

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