As advisors seek portfolio diversification for their clients, investments in emerging markets have been receiving a great deal of attention. It can be extremely challenging for advisors to accomplish the desired level of asset, security, and geographic dispersion on their own, so emerging markets may be a case in which actively managed mutual funds, as opposed to index funds or ETFs, can add value.
With robust GDP growth rates and significant investments in infrastructure, the China region stands out, and one top-performing fund in this area is managed by Mark Mobius, portfolio manager, president, and CEO of the $151 million Templeton World China Fund (TCWAX). Mobius started the fund in 1993 as a closed-end fund, but converted it into an open-end one in 2003.
For more than 35 years, Mobius has been involved in business in Asia, and he holds a valuable credential for emerging markets investing–a Ph.D. in economics and political science from M.I.T. He literally wrote the book on emerging markets–several of them, actually.
The fund has a remarkable record as the top-performing China equity fund over the 10-year and five-year time periods, according to Standard & Poor’s, earning annualized average total returns of 9.60% for the 10 years ended December 30, 2005. The fund earned 20.85% for five years versus 9.18% for the S&P/IFCI China Index; 30.70% for three years versus 29.29% for the Index; and 17.69% for one year versus 16.76% for the Index, according to S&P, which gives the fund five-star style rankings for the one-, three-, and five-year periods, and an overall ranking of five stars.
How much money do you manage? Altogether it’s now $22 billion, including global emerging markets and area funds. For example, we have an Asia fund, we have East European, Latin American, and a BRIC fund we just started, which is Brazil, Russia, India, and China. We also have a private equity fund, what we call a strategic equity fund. I would say about 75% is global emerging markets.
And the other 25%? That includes China funds, the regional funds, East European, and that sort of thing. Actually, the Asian funds have been growing at a very fast pace, and they’re beginning to overtake some of the global funds.
Why is that area so robust right now? I think people hear about China, India, and they get excited–and for good reason–because those countries have been growing at such a fast pace. You look at China’s growth, and consistently over the last 10 years now or more, it’s been easily 6%, 7%, 8%, 9%, and India now is beginning to move up very quickly, to have 6% to 7% growth, which is very fast for these countries, when you consider [their] size.
Where is your home base now? On a plane somewhere–but I have an apartment in Singapore so I spend a little time there; Hong Kong is big for us; I would say a month to two months of the year in Hong Kong and Singapore each, and the rest traveling, really, going around the world.
You converted the China World Fund from a closed-end fund to an open-end fund a couple of years ago. Can you tell me why? We have this problem with these closed-end funds with discounts and the shareholders look at that–particularly the institutional shareholders that make a business of going after these closed-end funds with discounts because they see something going at 10%, 15%, 20% discount, and they say, “Hey, let’s close this fund, get the assets, and make ourselves that money–that difference–by liquidating the fund.” What they normally do is have a vote either to dispose of the fund or open it. That’s what happened–the Harvard [Management] people [put] a lot of pressure on the directors to do something about the discount, so we decided to convert it into an open-end fund which immediately, of course, eliminates the discount.