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Mobius Looks to a New Frontier

Mark Mobius, Manager of Templeton Developing Markets TEDMX. Mobius has been investing in emerging markets for more than two decades. Interviewed on Oct 17, 2013.

Morningstar Advisor, 12/13/2013

1 In a recent blog post, you mentioned investors fretting over slower economic growth in emerging markets were missing the bigger picture. Why?
Investors have focused on a number of erroneous things. First, the idea that China is slowing down. It is growing at an astounding 7%. The second misconception is about “tapering.” The amount of money in the global economic system has expanded dramatically, and the Fed’s balance sheet is not going to shrink because of tapering, since that money is still in the global system. In addition, it is not only the U.S. Fed that has expanded its balance sheet. Finally, many point to the underperformance of emerging markets. But if we look back during the last 12 years, there are only two years that emerging markets underperformed the United States.

2 What themes are prevalent in the portfolios you run?
Consumers. We find that per-capita incomes are rising in emerging markets all over the world, so you will see more and more consumer-related names in the portfolios.

3 From a performance perspective, what have you been disappointed with in 2013?
Nothing has really disappointed me, because we have selected companies that pay good dividends and have strong balance sheets. Any price declines are a good excuse to buy more. Of course, we are disappointed by the slow pace of reform throughout the world, but that is not confined to emerging markets.<p>

4 What frontier markets are you most excited about?
We are really excited about almost all of them, but if you look at our portfolios, you will see Nigeria, Kenya, Zimbabwe, Ghana, Egypt, UAE, Saudi Arabia, Pakistan, and Vietnam have prominence.

5 Franklin Templeton recently closed its frontier markets fund to new money. Do you fear investors might be chasing performance?
There could be cases where investors are chasing performance, but it is quite muted because of the concerns regarding emerging markets generally. Of course, these concerns could be quite short-lived.

6 What advantages does a closed-end vehicle have over an open-end fund for investing in emerging markets?
There are no particular disadvantages or advantages to either. Some feel that a closed-end fund does not put the same pressure on the fund manager when redemptions come in as in the case of open-ended funds, but this has not been a significant factor since we have never had problems with managing redemptions in our open-ended funds.

7 You help oversee a wide-ranging research team. What do you think are the key traits of a good emerging markets analyst?
Curiosity, willingness to think “out of the box,” interest in people and what motivates them, love of study and patience.

8 Which has a greater influence on emerging markets economies, the United States or China?
China. Trade with China is largest within emerging Asia, the largest emerging markets area [by] market capitalization. But China is one part of the picture. You can’t overlook India, Russia, Turkey, South Africa, Indonesia, and Brazil.

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