FTSE 250 Genesis Emerging Markets Fund posted lacklustre half year numbers, with the vehicle lagging its benchmark for the period.
For its half-year ended December 31st 2013, the closed end Fund's net asset value per share (NAV) declined from £5.61 to £5.53, a -1.4% return, under performing its benchmark the MSCI Emerging Markets Total Return index, which saw a negative total return of -1.2%.
The fund's share price rose by 1% overall during the same period with the discount ending 2013 at a typical 9.5%, although these figures mask some of the market swings over the last few months.
The investment approach is to identify companies which are able to take advantage of growth opportunities in emerging markets for the benefit of shareholders, and invest in them when they are trading at an attractive discount to the fund manager's assessment of their intrinsic value.
Coen Teulings, Chairman of the fund, said that emerging market returns have been "somewhat lacklustre" for most of 2013, particularly in contrast with their developed counterparts.
Teulings said that the improved economic conditions in the US have enhanced investor sentiment in that market, while the likelihood of higher US interest rates has heightened concerns about the sustainability of emerging market performance in a tighter liquidity environment.
Meanwhile, the macro-economic fundamentals of a number of key emerging market countries remain relatively weak. The result, said Teulings, was that emerging markets underperformed developed markets by a considerable margin: over the six months to the end of December the MSCI Emerging Markets Index (Total Return) returned -1.2% in sterling terms versus the MSCI World Index's (Total Return) +7.2%.
Over 2013 as a whole the difference was even more extreme, with the MSCI World's +25.0% substantially outperforming the MSCI EM's return of -4.1%.
Commenting on the outlook, Teulings said the weakness of emerging market returns has continued in 2014 and the difficulties faced by developing economies and the businesses within them remain significant.
He cautioned there remain a number of challenges to the profitability of the fund's holdings: "These include an increasingly competitive environment as developed market companies continue to seek new business in the emerging world, increased government intervention in certain sectors for political ends and a lack of impetus behind reform measures in many markets."
Still, the fund's board share the manager's confidence that the high quality companies chosen to make up the Genesis portfolio will, over the long term, deliver the performance that shareholders have come to expect.
In late afternoon trade Genesis Emerging Market Fund shares
were down 0.8% or 4.35p to 495.65p.