Adieu Mark Mobius

It will be the end of an era in emerging markets investing…

Investing, in many ways, is about being in the right place at the right time. Nearly 35 years ago, there was something interesting happening in lesser known frontier markets. Countries across Asia and Latin America were sitting on the cusp of massive growth backed by cheap currencies, low costs and an export focus. The man who identified this theme nearly 35 years ago was Mark Mobius, the global head of Franklin Templeton. In many ways, Mobius was the Christopher Columbus of emerging market investing. He made huge bets across Asia at a time when fund managers were wary of the future of these stories…

A consistent outperformance…

 As far as emerging markets were concerned, Mark Mobius was in the right place at the right time. As macro economic growth translated into stock market returns, the Templeton Emerging Market Fund outperformed its peers by a huge margin. The reasons were not far to seek. It was a market that was virgin for foreign investors, research was not well developed and cheap bargains and long term opportunities were aplenty.

Much changed since 2007…

In a way, the sub-prime crisis and its aftermath were critical factors in taking away the sheen of emerging markets. Global fund managers were becoming wary of emerging markets stories and the global theme was risk-off rather than risk-on. There were also macroeconomic problems. Most emerging markets had inherently unstable currencies. Their dollar debt was mounting in an easy money era and the problem was being compounded by a strong dollar. In addition, an over-dependence on exports and commodities made them vulnerable to global demand downturns. Not surprisingly, most of Mobius’ emerging market funds under-performed peers in the last decade.

Still bullish on emerging markets…

As Mobius hangs his boots at the age of 79, his legacy will be remembered as much for his success in emerging markets as for his failures in the recent years. Interestingly, Mobius continues to be bullish on emerging markets till date and expects the tide to turn for the emerging markets in the coming years.

Ironically, he may be once again right. After years of growing at the cost of emerging markets, most of the developed economies are at saturation point. The risk-off looks set to shift to a risk-on trade. Over 60% of annual global growth will still come from India and China. There is no way you can ignore that reality. Mobius’ conviction on emerging markets may be right once again. It is just that he may not be at the helm to see his prophecy fructify! ©

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