When buying funds in sectors that are more difficult to navigate, such as emerging markets, having a trusted name that has been through many economic cycles is a benefit.
Between them, Mark Mobius and Carlos Hardenberg have some 60 years of experience in picking emerging market stocks.
Yet the Mobius Investment Trust remains a modest size. At £151m, it is the fifth-smallest trust in the IT Global Emerging Markets sector, less than a 10th of the size of the Templeton Emerging Markets Investment Trust that the pair used to run. This could be viewed as an advantage, as the portfolio is designed to pick small-cap stocks.
Investors that have yet to buy the trust have missed out on good returns since its launch in 2018. It is the third-best performer among its peers over this time, returning 53.8%.
Performance of trust vs sector and index since launch
Source: FE Analytics
Below, co-manager Hardenberg (pictured) tells Trustnet about his plans for growth, how the trust is different from the rest of its peer group and why he is comfortable with a high cash weighting.
What is your process for picking stocks?
The key difference is we follow a deep investigative process based on primary sources that are unorthodox – by which I mean we do not just digest broker notes and make a decision. This often takes months to conduct, but is something that can be done when running a concentrated portfolio.
We are deploying a mix of carefully selected internal resources, but also, on a case-by-case basis, recruit the best external experts in the industry or through academia.
In my case I have 20 years of experience and in Mark Mobius’s case it is 40 years. We have built a network that enables us to get premier access to entrepreneurs, decision makers and businesses in the emerging and frontier markets.
Why pick your fund?
I would not put our fund over any others as it is very different. If you want to own the biggest names such as Tencent, Samsung or Alibaba, then don’t invest in us.
If you want access to future leaders at the smaller- and medium-sized end of the market in a trust that has a very high active share, then we offer that as a complementary fund in a portfolio.
What have been your best and worst calls over the past year?
The largest contributor to the strong performance of the Mobius Investment Trust in 2021 was Taiwanese semiconductor intellectual property provider eMemory, contributing 11.2% to the trust’s net asset value (NAV) rise.
The largest detractor was Brazilian omnichannel retail company, Americanas SA, which lost the fund 1.4% of its NAV.
Which stock are you most excited about?
Zilltek is a leader in MEMs, which are sensors in microphones. With the rise in technology, the internet of things, autonomous driving and automated factories, sensors have been needed, whether it be in low-end consumer goods or some of the most sophisticated items out there. We think that over the next 10 years the demand will grow exponentially.
Are there any sectors that you will not invest in?
Yes. We will not invest in fossil fuels or commodities and we will not buy larger banks – because we think they will be disrupted going forwards. We also do not buy sin stocks such as tobacco or gambling.
The portfolio has a lot of cash. Why?
We do not worry about cash levels. We may have more going forwards and sometimes will have none at all, but it takes time for new ideas to reach the level where we can buy.
We also recently issued some shares, so the size of the trust is growing, but that has yet to be fully deployed.
We see cash as a strength to give us the flexibility to manoeuvre. We do not follow this blind recipe of constantly having as little cash as possible.
The trust is not geared. Is it something you will consider?
Yes. So far, we are still sub-scale and are too small. We would love to raise the size of the trust and attract more long-term investors. The focus is on performance and growing the trust that way. Leverage is something we will do over time, but we are not there yet.
Shares are on a small premium. Is this a result of the fund’s performance?
This is the magic question that I have had to deal with for the past 20 years, having run the Templeton Emerging Markets Investment Trust. We outperformed year after year and we still had a 10% discount.
My guess is as good as yours. I think in our case we are trading at a premium because we have done well and there are not that many competing trusts that can do the same.
What do you do outside of fund management?
Flyfishing. I started in the UK when one of my closest friends took me. I spent more time flyfishing than studying at university, or at least combined the two by taking my books to the river.