Templeton Emerging Market Investment Trust (Temit) has outperformed the average global emerging markets trust in the year since renowned manager Carlos Hardenberg jumped ship to join emerging markets veteran Mark Mobius at his eponymous new firm and has bested its closest rival in the near term.
Since Hardenberg’s exit was revealed on 31 January 2018 the closed-ended fund, the largest emerging markets investment trust at £2.1bn, has fallen 4.7% which is better than the 6.5% and 5.3% losses delivered by the MSCI Emerging Markets index and the Global Emerging Markets investment trust sector respectively. Over shorter periods, performance is even stronger with Temit topping the returns of its benchmark, the MSCI EM index, by 5% and 8% on a three and six-month view.
Chetan Sehgal, based in Singapore, has led the trust since Hardenberg’s exit and Martin Currie’s Andrew Ness was named as a London-based portfolio manager in July.
| 1m | 3m | 6m | 1yr | 3yr | |
| Franklin Templeton Emerging Markets TR in GB | 5.41 | 12.59 | 8.59 | -0.32 | 99.54 |
| Global Emerging Markets sector | 3.25 | 7.58 | 0.92 | -2.09 | 51.68 |
| MSCI Emerging Markets index | 4.09 | 7.43 | 0.46 | -3.54 | 64.03 |
Source: FE Analytics; total return calculated on 25 February 2019
Last year was a challenging period for EM funds generally not least of all because of the US China trade war looming large over the asset class, Winterflood Investment Trusts head of research Simon Elliott noted. While Temit did better than the average fund in the sector, it still lost clients money over the year, he stressed.
JPMAM and Mobius rivals
Last April, Stifel touted JP Morgan Emerging Markets, managed by Austin Forey, as an alternative for Temit investors “seeking stability in management and philosophy”. The investment trust outperformed Temit over a one-year period delivering 2.2%; however, over more recent periods it has lagged with 5% returns over six months.
Temit has also outperformed the Mobius Investment Trust, which raised £100m at its IPO, since it began trading on 1 October 2018. Over that period, Mobius delivered 2.2%, while Temit returned 7.5%. Mobius has returned 5.4% over the last month.
However, Elliott cautions against making comparisons between the two trusts on the basis that Mobius’ vehicle is not fully invested (only 72% of cash has been deployed), is much smaller in size and is targeting completely different companies – mid and small-caps with a frontier market bias and ESG bent.
“JP Morgan Emerging Markets is more comparable in that it’s a genuine global EM vehicle,” he said.
Narrowing discount
Elliott said an improving sentiment around emerging markets has led to a narrowing effect on Temit’s discount. Over the last 12 months Temit has traded on an average discount of 11% compared with its current discount of 8.2%.
JP Morgan Emerging Markets is trading at a slightly higher discount of 9.2%; however, Mobius is trading at a premium of 1.9%. None of the emerging market trusts currently have any gearing.
But Winterflood is currently recommending the £1.2bn JP Morgan Emerging Markets trust to clients on the basis that it has a stronger long-term track record as well as manager continuity with Forey at the helm since 1994. He also noted JP Morgan’s huge amount of resources in EM as another positive.
