Mark Mobius, who is credited as a pioneer in emerging-market investing, will step down as the lead manager of one of the oldest developing-nation stock funds after trailing his benchmarks in recent years.
The Templeton Emerging Markets Investment Trust, a 1.9 billion pound ($2.9 billion) fund traded in London and New Zealand, has selected Carlos Hardenberg to take over from Oct. 1, it said in a filing. Mobius, 78, will support Hardenberg as a portfolio manager and remain chairman of the Templeton Emerging Markets Group, which oversees $39 billion in assets, it said.
Templeton routinely evaluates portfolio managers and “makes changes based on what we believe is in the best interests of our clients,” Mobius said in the filing.
“Investors have been disappointed over the last year or so,” Ewan Lovett-Turner, director of investment company research at Numis Securities Ltd., said by phone from London. “The succession planning around Mobius and his role going forward has been in people’s mind for quite some time. The board is taking steps to clarify what’s going on with the management. It’s a positive move.”
Lovett-Turner said Numis removed the Templeton trust from its recommendation list on Monday. The fund’s focus on cheap stocks has fallen out of the favor while the managers failed to offer a “convincing explanation” for the underperformance, Numis’s analysts said in a report, recommending the $1.1 billion Genesis Emerging Markets as an alternative.
While the Templeton Trust delivered outsized gains in early years after Mobius established it in 1989, its recent performance has slipped. The fund has declined 0.7 percent annually over the past five years through Monday, compared with a gain of 2.1 percent in its benchmark, according to data compiled by Bloomberg. It traded at a discount of about 10 percent to its net asset value.
In the annual report, Peter Smith, chairman of the Templeton trust, acknowledged that the fund’s performance was “very disappointing,” while ensuring investors that the board will challenge the “investment model” with the managers at each quarterly meeting.
Rebecca Radosevich, a spokeswoman for Franklin Templeton Investments, declined to comment beyond what the company said in the statement. Phone messages left with Mobius and Hardenberg after regular business hours were not returned.
Mobius has been under pressure to improve his funds’ performance. While they still make money, 11 of the 13 largest funds that Mobius oversees at Franklin Templeton Investments have underperformed their benchmarks over the past five years, Bloomberg reported in early May.
It’s natural for Mobius to hand over to a newer generation of managers, said Peter Douglas, the principal of the Singapore chapter of CAIA Association, a global group on alternative investment education.
“Mark Mobius is to emerging market investing what Colonel Sanders is to fried chicken,” said Douglas, who also runs his own Singapore-based research firm GFIA Pte.“He may not have been the most hands-on frontier pioneer, but he is the icon of the industry, and has been the global cheerleader of emerging markets for almost three decades.”
Hardenberg, who has been with Templeton for 13 years, will relocate to London, according to the statement. Chetan Sehgal, an executive vice president, will continue to serve as senior research analyst, it said.
Hardenberg and Sehgal specialize in frontier markets and small cap companies, which raises the question whether they will change the investment focus of the fund, Numis’s analysts said in the report.