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magazineWill Turkey-led emerging markets sell-off hurt Mobius’ plan for new trust?
Veteran emerging markets investor Mark Mobius is planning to launch Mobius Investment Trust, the first closed-end fund from his new Mobius Capital Markets venture, in September.
Mobius sees opportunities in this space after a big sell-off linked to tensions over trade, an increase in US interest rates and a strong US dollar.
Emerging markets suffer from higher US rates and strength in this currency as it causes capital to flow out of these markets
and into the world’s largest economy, plus many of these countries have significant dollar-denominated debt.
But is Mobius being too brave given how concerns about Turkey’s economic situation have caused a new sell-off in emerging markets assets?
Sentiment will have to radically improve over the coming weeks if Mobius is to stand a chance of getting the investment trust’s launch off the ground.
That said, emerging markets are still appealing if you take a long-term view. Over the past decade, four emerging markets trusts have chalked up more than 100% total return.
Topping the list is JPMorgan Emerging Markets (JMG) which is steered by Austin Forey. Although not of the same vintage as Mobius, Forey is also a long-standing investor in developing economies with more than two decades worth of experience.
He is bullish on India and his investment process involves finding companies on which he has a high conviction, underpinned by their sustained competitive advantages.
Templeton Emerging Markets (TEM) has returned 115% and was previously managed by Mobius up until 2015.
Interestingly, despite the strong performance of these trusts, all four trade at material discounts to net asset value (NAV).
Only three emerging market trusts trade at a premium to NAV. Not one of the three has been around long enough to chalk up a decade’s worth of returns. Fundsmith Emerging Equities (FEET), launched in 2014, is popular with investors thanks to star fund manager Terry Smith.
The other two have at least some exposure to frontier markets, which although arguably even higher up the risk spectrum than emerging markets, have different sensitivities. (TS)
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