The manager, who has been at the helm of the fund since it launched in 1991, says: “The whole commodities area is something we are focusing on. There has been a lot of negative sentiment and the prices have gone down as have the stocks so we have started to pick up some more names in this space.
“In South Africa, a lot of the mining stocks have come down dramatically and the currency has weakened. Since we are sterling or US dollar investors we can buy these stocks much cheaper and that is an opportunity. Companies like Anglo American are very depressed in dollar terms.”
However, those investors that backed Mr Mobius just five years ago would today be sitting on a handsome return. To date (September 28), the fund has surged ahead of its IMA Asia ex Japan peer group, returning 98.08 per cent against a sector average of 78.35 per cent, according to data from FE Analytics.
The fund, which aims for long-term capital appreciation, is benchmarked against the MSCI All Countries Asia ex Japan index, which posted a 81.67 per cent return in the same time period.
Mr Mobius is a bottom-up stockpicker, focusing on companies that are either listed in Asia or carry out more than 50 per cent of business in the region.
“Generally the rule of thumb is that the company has to generate 50 per cent of earnings from these markets,” he says. “We have maybe 5-6 per cent of the portfolio in companies that are expanding into these markets.”
The manager is value-orientated and applies this approach for undervalued companies across his range of emerging market, frontier market and Asia-focused funds.
Using the Templeton database comprising of roughly 21,000 emerging market companies, Mr Mobius and his team look for those businesses that are at a “discount to projected future intrinsic value”.
The team carry out fundamental analysis, followed by in-depth analysis at both the stock and sector level. Based on this information, the analysts produce a target price for the individual companies. Mr Mobius explains: “The market is driven by emotion and it is our job to sit back and judge what is really happening then react to that. The problem that we have is that these markets haven’t really come down all that much. You haven’t seen emerging markets in a bear market, it has been a correction in an ongoing bull market.”
Year to date, the fund has suffered significantly, posting a loss of 4.29 per cent, compared with a positive sector average return of 3.29 per cent. The fund’s MSCI All Countries Asia ex Japan index benchmark also posted a positive figure in 2013 so far, returning 2.53 per cent.
The main detractor, Mr Mobius explains, has been his exposure to the commodities sector, as well as exposures to Thailand, Indonesia and India which were three weaker performers recently.
“The commodity companies have gone down and not performed as well, but now we are beginning to buy in again at the lower prices,” he says. “The way to turn around the performance is to buy the stocks that have come down the most – the companies that are involved in Latin America, gold companies and basic materials companies.”
Among the fund’s top-10 holdings are Oil and Gas Developments, a company that refines and sells oil and gas in Pakistan, as well as more common oil and gas names such as Petrochina.
In spite of the hit to performance, Mr Mobius has conviction in the long-term drivers behind the commodity sector and argues that the fund’s exposure will be beneficial.
It is difficult not to believe in this conviction. This is a manager who has been a successful investor in the emerging and frontier markets, as well as the wider Asian region, for roughly 25 years – his first fund, Templeton Emerging Markets, was launched in 1989. A six-month blip, for those who have faith in Mr Mobius’s ability to make money in the long term, can certainly be forgiven.
EXPERT VIEW
Ben Willis, investment manager and head of research, Whitechurch Securities
Verdict
“Mark Mobius is one of the most experienced investors within these markets and this is replicated in the fund’s performance record since launch, which has outstripped both peer group and benchmark index. Recent performance has been lacklustre, though Mr Mobius’s value orientated approach could provide significant upside if we see investor capital flow back into the region’s markets.”
