The emerging market fund that’s up 49%
EMERGING markets trust Mobius will celebrate its third anniversary at the start of next month. And while the newish fund has faced hurdles in the form of the pandemic and being a small investment fish in a big sea, it’s done a pretty good job so far for investors.
Since launch, the trust’s share price has risen from £1 to £1.49, a respectable return of 49 per cent for shareholders who invested from the start. According to lead manager Carlos Hardenberg, the share price growth is vindication of the trust’s focus on small to medium-sized companies.
‘Our style is all about investing in companies that are not well researched by others,’ he says. ‘Their shares are not overbought, the businesses are often not well understood, and their share price usually does not reflect their true value or potential. We then invest with high conviction.’
The result is a £156million portfolio comprising just 28 stocks – and one that does not include the ‘big’ emerging market stocks typically held by most rival funds: the likes of Chinese tech giants Alibaba and Tencent. Instead, the focus is on companies often operating in niche areas and leading the way in terms of technological advancement and product development.
Often, the trust’s six-strong investment team draw upon external experts – for example, academics, doctors and those working in private equity – to identify emerging investment themes. ‘It allows us to move up the learning curve,’ says Hardenberg.
Top ten holdings Persistent Systems and eMemory Technology are typical of the companies Hardenberg and his investment team hunt down. Indian business Persistent Systems, one of the trust’s first investments, provides information technology solutions for companies operating in the healthcare sector.
‘It makes good profits,’ says Hardenberg, ‘and has a strong balance sheet which is a driver of growth.’ Taiwan-based eMemory
Technology is a leader in making semi-conductor chips more secure from hackers. Taiwanese companies account for 17 per cent of the trust’s assets – a bigger slice than Chinese businesses (14 per cent). Hardenberg’s view is that Taiwanese-listed companies tend to benefit from better corporate governance.
‘We’re very careful where we invest in China,’ he adds. ‘We avoid big tech and sectors where there is a risk of regulatory or political interference. We also have concerns over the reliability of much corporate data.’
Its biggest Chinese holdings include fast food home delivery service Yum China and healthcare provider EC Healthcare. The shares of both companies are listed in Hong Kong, the preferred way for Hardenberg and his team to get exposure to Chinese companies.
Hardenberg believes the outlook for emerging markets is encouraging, provided the world economy continues to recover. A potential blip is political unrest in countries such as Brazil and Turkey. Darius McDermott, managing director of investment scrutineer FundCalibre, says Mobius has been a ‘success’, but prefers more established trust JPMorgan Emerging Markets.
Mobius takes its name from Mark Mobius who is often referred to as ‘Mr Emerging Markets’ as a result of being the investment force behind Templeton Emerging Markets. When launched in 1987, this was the world’s first fund to specialise in emerging markets. Together with Hardenberg, Mobius set up Mobius Capital Partners in 2018. The trust’s annual charges total 1.5 per cent (a little on the high side) and the stock market identification code is BFZ7R98.