Mobius: Why I’m launching an Africa fund
The Franklin Templeton manager says the continent now has many of the same characteristics that China and India displayed in the run-up to their boom years.
By Mark Smith , Reporter, FE Trustnet
Monday April 23, 2012
Emerging markets specialist Dr Mark Mobius
believes there are plentiful opportunities in Africa to warrant the launch of a specialist fund focused on the continent.
Mobius (pictured right)
is one of the highest-profile emerging markets managers and runs numerous multi-billion pound portfolios including the £1.9bn Templeton Emerging Markets investment trust.
The new fund, Templeton Africa, complements the existing Templeton Frontier Markets portfolio and signals a significant turning point in the investment outlook for the region.
"We believe that Africa’s markets present significant opportunities for development due to a combination of strong economic growth, rising demand for the region’s vast natural resources, and a growing consumer market," said Mobius.
"Africa is expected to grow more than 7 per cent annually in the next 20 years, due to an improving investment environment, better economic management and developed as well as emerging markets’ rising demand for the continent’s resources, all of which offer a compelling proposition to global investors."
A recent FE Trustnet
article reported how investors with a longer investment horizon could benefit by allocating more aggressively to the world’s youngest economies
. Money markets in frontier nations are becoming more sophisticated, corporate governance is improving and the majority of these countries are much more politically stable than they have been before.
According to FE data, the MSCI Frontier Markets Africa index has returned 30 per cent over a three-year period – almost twice as much as the MSCI Frontier Markets index.
Performance of indices over 3-yrs
Source: FE Analytics
Mobius’ experience and expertise adds weight to a region that remains overlooked by the vast majority of investment houses. There are currently only three pure Africa funds in the IMA unit trust and OEIC universe – JPM Africa Equity
, Neptune Africa
and CF JM Finn Africa.
The manager says the continent is poised to benefit from compelling investment super-trends such as increased demand for commodities, and rising wages.
"Africa has impressive stores of resources, not only in minerals but also in agriculture — 60 per cent of the world’s uncultivated arable land is found in Africa," he continued.
"As global demand for hard and soft commodities continues to grow, we believe Africa is in an enviable position with its vast natural resources."
He added: "Demographically, Africa’s growth should benefit from a relatively young population with rising purchasing power. The median age of the African population is 20, compared to 40 for the developed world, and it is estimated that in 10 years the number of African households earning more than $5,000 will jump from 85 to 128 million."
"This rapid growth in income is an indicator of future expansion in the region, with rising demand for goods, services and products, which in turn helps to accelerate economic development."
Mobius has a strong record in emerging markets. Our data shows that the Templeton Emerging Markets investment trust has returned a staggering 405 per cent over the last decade while the Templeton Frontier Markets fund has returned 47.43 per cent over the last three years compared with 15.77 per cent from the MSCI Frontier Markets index.
Performance of fund vs index over 3-yrs
Source: FE Analytics
Africa is already benefitting from strong investment from China, and Mobius argues that foreign money can help the continent develop its infrastructure and promote further investment opportunities.
"As larger emerging markets increasingly invest in Africa, we are seeing money funnelled towards infrastructure projects such as roads, bridges, schools and hospitals, all of which are likely to benefit African economies in the years to come," he explained.
"These measures help mitigate the investment risks present in Africa and promote a region that is gradually emerging with the development of capital markets, consumerism and technology."
Ian Wilkins, Franklin Templeton UK country head, commented: "It is Dr Mobius and the team’s conviction that now is the right time for investors to consider the African markets as they represent some of the most compelling growth opportunities over the long term."
"With the team’s established on-the-ground presence and bottom-up stock-picking approach, Dr Mobius and his team believe that some of the same characteristics they observed in economies such as China and India decades ago are now in evidence in a number of African economies."