Tag Archives: templeton emerging markets

Stocks in Focus: Templeton Emerging Markets

This week I am reviewing Templeton Emerging Markets (TEM), which is the largest investment trust within the Emerging Markets sector. The Trust has recently seen an unexpected change, with lead manager, Carlos Hardenberg, handing in his resignation.

Last September I wrote an article reviewing the Trust and Mr Hardenberg’s first two years as lead manager. During this time Mr Hardenberg outperformed his benchmark (96% vs 67%) and transformed the Trust into quite a different beast than the one he took over. One of the more significant changes was his push into the technology sector. At the end of December 2017 the technology sector was the largest weighting within the Trust at 31% (vs 6% in mid 2015), with giants such as Samsung, Alibaba and Tencent featuring in the top 10 holdings.

Effective immediately, Chetan Sehgal will be taking over as lead manager. Our early understanding is that he will look to keep the Trust running with the same investment process. Mr Sehgal has been with Franklin Templeton since 1995 and is a senior Managing Director and Director of the Global Emerging Markets and Small Cap Strategies. He should be capable of maintaining the process as he has been working closely with Mr Hardenberg during his tenure and was a part of the previous team under emerging market veteran Mark Mobius.

Given how much Mr Hardenberg had turned the Trust around and developed the existing strategy, this is quite a large disruption and causes some concern. We will monitor developments closely and expect to meet with Mr Sehgal in the near future to hear his plans for the Trust’s portfolio.

https://www.nwbrown.co.uk/news/company-report-library/

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Stocks in Focus: Templeton Emerging Markets

This week I am looking at Templeton Emerging Markets (TEM), which is an investment trust that aims for capital appreciation through investing in companies that either operate or are listed in emerging markets. The trust is coming up to its second year of new management after emerging markets pioneer Mark Mobius stepped down from his 26 year tenure as lead manager, to be replaced internally by Carlos Hardenberg.

Mr Hardenberg has enjoyed a good start to his tenure, having significantly outperformed the index since his appointment (96% vs 67%). In a recent presentation it was particularly interesting to read his thoughts on the rising influence of passive investment and the risks associated with this.

Passive investments replicate the index and provide investors with cheap access to markets. However, the large sums that have been flooding into the emerging markets have significantly changed the ownership of the underlying companies. Due to the nature of passive investors, TEM is unable to work with them when it comes to voting or improving corporate standards, a key aspect of investing in emerging markets. Furthermore, the large flow of money into investments that replicate the index also increases the dominance of certain countries and companies. Specifically, the top 5 countries in the Emerging Markets Index make up 71% of the index, and the top 10 companies account for 24% of the index.

The danger here is that passive investors are, perhaps unknowingly, being crowded into a fairly concentrated selection of countries/companies that are being inflated in value by the weight of money being invested in them. By using an actively managed fund such as TEM, investors can gain exposure to a more sensibly constructed portfolio of assets that takes into account diversification and value.

https://www.nwbrown.co.uk/news/company-report-library/