TIDMFEML
Fidelity Emerging Markets Limited
05 October 2021
Fidelity Emerging Markets Limited
Introductory note from Nick Price, Portfolio Manager - Fidelity
International
Dear Shareholders and potential investors,
Following the EGM held on Friday, Chris Tennant (Co-Portfolio
Manager) and I, are delighted to have been asked to take over the
management of the newly named Fidelity Emerging Markets Limited
("FEML"). We would like to thank you for the faith that you, as
shareholders, and the Board have put in us.
Markets are never static and I'm sure you will be keen to
understand our plans moving forward.
The team at Fidelity has been working with the outgoing
managers, custodian and administrators over the past few weeks to
ensure an orderly transfer of the assets to our management. As a
result, we are well placed to pick up the reins immediately.
Clearly recent weeks have seen moments of market turbulence - in
part caused by China anti-trust laws and regulation - that we
anticipated in our quarterly update, sent to investors in our
existing mandates in July. More recently, beleaguered property
developer, China Evergrande has sent ripples across the market.
Whilst these events can be unsettling, as an experienced emerging
markets team, it is our role to navigate choppy waters, aided by
insights from investment team colleagues based in mainland China
and throughout the Asia region.
Importantly, from this global volatility new opportunities
arise. We are confident that we will provide you with a highly
resilient portfolio with an abundance of quality characteristics
such as high returns, prudent balance sheets and valuation
multiples with scope to deliver attractive total shareholder
returns as we look ahead.
Moving forward, we will be sure to share updates on our thinking
and the positioning of the Company on a regular basis with you.
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.
At the heart of our strategy is a belief that we can deliver
outsized returns in Emerging Markets through stock selection,
driven by fundamental views. We combine skill, resource and
discipline with the aim of generating enhanced risk-adjusted
returns. The Company's closed-end structure means we will be able
to invest in smaller companies, below $5billion (US) market cap, as
well private companies before they list on the stock market.
As set out in the circular and our proposals to the Board and
shareholders, we use enhanced investment powers through the
addition of both long and short derivatives (where we seek a return
from underlying stocks which we expect to fall in value). We do
this to increase our exposure to those companies where we have a
high conviction investment view ('alpha') while carefully managing
our risk exposure to the market overall ('beta'). These positions
are actively monitored and adjusted daily within strict limits.
By design, our overall exposure to the market is kept relatively
conservative - and net gearing is unlikely to exceed the broad
index by more than a few percent. The portfolio construction
however allows us to take geared bets in individual positions
offsetting these with shorts as described above. This is a flexible
and very cost-efficient way of managing these exposures. However,
it should be noted that increased and more complicated use of
derivatives could result in situations where performance may rise
or fall more than it would have done otherwise.
Of course, we want to ensure that as we realign the portfolio,
we focus on achieving the best value for shareholders and we will
therefore not rush where patience may be rewarded. Completing the
changes to the portfolio will therefore take several weeks, and we
will update shareholders again when this process is largely
complete.
More information about our approach and strategy can be found at
the Company's new website www.fidelity.co.uk/emergingmarkets which
will be frequently updated and where the latest share price,
discount and portfolio information may be found.
Once again - I would like to thank you all for the faith that
you have put in us. We very much look forward to a long and
prosperous future together.
Nick Price - Portfolio Manager
Important Information
Fidelity only offers information on products and services and
does not provide investment advice based on individual
circumstances, other than when specifically stipulated by an
appropriately authorised firm, in a formal communication with the
client. Fidelity International refers to the group of companies
which form the global investment management organisation that
provides information on products and services in designated
jurisdictions outside of North America.
This communication is not directed at, and must not be acted
upon by persons inside the United States and is otherwise only
directed at persons residing in jurisdictions where the relevant
funds are authorised for distribution or where no such
authorisation is required.
Unless otherwise stated all products and services are provided
by Fidelity International, and all views expressed are those of
Fidelity International. Fidelity, Fidelity International, the
Fidelity International logo and F symbol are registered trademarks
of FIL Limited. Research professionals include both analysts and
associates. No statements or representations made in this document
are legally binding on Fidelity or the recipient. Any proposal is
subject to contract terms being agreed.
Before investing you should read the latest Annual Report and
Key Information Document, which are available from
www.fidelity.co.uk/emergingmarkets
Issued on behalf of Fidelity Emerging Markets Limited by FIL
Investment Services (UK) Limited, a firm authorised and regulated
in the UK by the Financial Conduct Authority. FIL Investment
Services (UK) Limited is registered in England and Wales under the
company number 2016555. The registered office of the company is
Beech Gate, Millfield Lane, Lower Kingswood, Tadworth, Surrey, KT20
6RP, United Kingdom.
For more information, please contact Fidelity:
Alex Denny: 01737 834 530: email
fil-fidelityinvestmenttrusts@fil.com
Learn more at www.fidelityinvestmenttrusts.com
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