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Hard Times Humble the Eminence Grise of Emerging Markets

Despite performance woes, Templeton Asset's Mark Mobius has been a leading fixture in emerging markets.

When Mark Mobius is not climbing Mount Kinabalu in Malaysia, exploring the foothills of Tanzania’s Mount Kilimanjaro in a Land Rover or riding his bicycle through the Italian Alps, the 73-year-old bachelor — known for his signature white suits, matching white shoes and clean-shaven pate — can be seen sussing out new investment ideas on the ground or jetting among the Templeton Emerging Markets Group’s 15 offices spread across Africa, Asia, Eastern Europe and Latin America.

After emerging markets’ tough year and a half, which hurt the performance of the U.S.-registered mutual funds that make up 89 percent of his group’s $25 billion in assets, Mobius has something to celebrate. With the markets staging a comeback, he believes that the resurgence in Brazil, Russia, India and China, in particular — where he invests the bulk of his capital — is sustainable, despite the risk of as much as a 20 percent correction by year’s end.

“I am very bullish,” says Mobius, executive chairman of Templeton Asset Management in Singapore. “There is money to be made.”

Still, it’s been a rough road for his investors. In the five-year period ended September 18, none of the five U.S.-registered mutual funds managed by Mobius’s team were in the top quartile of Morningstar’s universe of comparable funds.

The Templeton Developing Markets Fund, which has $2.8 billion in assets and is one of Mobius’s biggest offerings, has suffered. Through September 9 the fund had underperformed the MSCI Emerging Markets index over the trailing one-, three-, five- and ten-year periods. During the past decade it was beaten by 80 percent of comparable funds.

Despite such performance woes, Mobius has been a leading fixture in emerging-markets investing for decades. After receiving a Ph.D. in economics from the Massachusetts Institute of Technology in 1964, the Hempstead, New York, native took an interest in emerging markets and worked for International Research Associates in Japan, South Korea and Thailand before moving to Taiwan to open the local office of Vickers Da Costa Securities Holdings, a British brokerage firm, in 1985. Two years later, as Citicorp (now Citigroup) was poised to buy Vickers, Mobius defected to the buy side, joining Templeton, Galbraith & Hansberger.

When Franklin Resources bought Templeton in 1992, Mobius found himself reporting to then-CEO Charles Johnson, who relentlessly worked Mobius’s extensive connections in Brazil, China, Mexico, South Korea, Vietnam and other countries where Johnson anticipated long-term economic growth and wanted to buy well-run asset management firms.

Despite his funds’ recent stumbles, Mobius says he isn’t making any dramatic changes to his investment process. “We are talking about long-term value,” he notes.

Nonetheless, Morningstar analyst Gregory Warren says, the fund manager appears to have made changes in the asset allocation of the Templeton Developing Markets Fund, whose assets are invested mostly in banking, energy, telecoms and other large-cap stocks in BRIC countries. Performance has improved, and the fund beat the MSCI EAFE index by 28.7 percentage points this year through September 22.

Mobius says that Franklin’s management leaves him alone to run his value-oriented funds as he sees fit. Is he under pressure from the top to beef up performance? Franklin CEO Gregory Johnson hasn’t even raised his voice on the phone. “Greg takes it in stride,” says Mobius. “He knows these things happen.”

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Franklin Local Managers Thrive in Emerging Markets

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