Templeton Emerging Markets Investment Trust

lvader

Fed keeps printing at full steam...

grey_gym_sock

most taxation is (and should be) of economic activity or productive assets. so you tax businesses where they operate (which can mean: employ ppl, sell, have fixed assets). you can also tax things that can't be moved out of the country, i.e. land (because it has a rental value - that's mainly what you're taxing), and also natural resources at the point of extraction (and you'd be mad not to tax that, if you have any valuable natural resources).

very rich ppl can put all their money in some tax haven, sure. but it won't make any return unless it's ultimately (perhaps indirectly) invested in real economic activity or productive assets, at which point it can be taxed. very little real economic activity actually happens in tax havens.

yes, the dollar is likely to lose reserve currency status. i think some chinese central bankers were suggesting that a basket of world currencies should be used as a reserve currency. so that would be a relatively gradually change, though definitely to the disadvantage of the USA.

singapore may have just as good skills and infrastructure as the west. the total population in asia with that level of economic development is still quite small compared to the populations of developed north america and europe. i expect (as do most ppl) that parts of asia will catch up with or overtake the west. but as their economic development advances, their salaries will rise, too. you never actually have to worry about competing with ppl with the same skills as yourself and a tiny fraction of the salary. overall, poorer countries getting richer is not a threat to rich countries (except perhaps to egos).

also, when you invest in US companies, many of them operate globally, and will gain from the development of asia.

Ark_Welder

grey_gym_sock wrote: »

also, when you invest in US companies, many of them operate globally, and will gain from the development of asia.

According to the World Bank 2011 data, US exports of goods and services is only 14% of GDP - the same level as Haiti, Pakistan and Eritrea:

http://data.worldbank.org/indicator/NE.EXP.GNFS.ZS?order=wbapi_data_value_2011+wbapi_data_value&sort=asc

Interesting to see the UK exports of 32% compared to China's 31%

grey_gym_sock

yes, but many US companies also make stuff outside the USA, either to import or to sell elsewhere. so you are partly buying into the world economy by buying US companies.

the UK probably has higher export figures because it's a smaller economy. trade between the UK and other EU countries is a bit like trade between different parts of the US, which doesn't count as exports. it's china's exports that are very high.

Thrugelmir

grey_gym_sock wrote: »

higher taxation (of corporate profits, or the very rich) in the USA is politically impossible because the ppl/corporations who would be taxed more have bought the politicians.

Having offshore cash is all very well. For shareholders to enjoy the benefit then the cash has to brought onshore. Therein lies the problem.

TCA

sabretoothtigger wrote: »

I'm still buying emerging market currency bonds.

grey_gym_sock wrote: »

US quoted companies represent a major part of the world's productive economy. far bigger than all quoted companies in emerging markets combined.

Thrugelmir wrote: »

Having offshore cash is all very well. For shareholders to enjoy the benefit then the cash has to brought onshore. Therein lies the problem.

You've probably answered indirectly already but I'm not getting it - my simple question - would any of you buy an emerging markets investment trust? And in particular TEM?

grey_gym_sock

sorry, this got a bit off-topic ...

i probably wouldn't buy TEM, as i'm not that keen on emerging markets in general. apart from a few countries which do appear to be on the way to becoming developed markets (mainly in asia), it all seems a bit high-risk to me.

if you do want broad global exposure to emerging, then a closed end structure (i.e. an investment trust) is not a bad idea, as these markets can be illiquid.

to tie in with my earlier posts, i'd mostly try to get exposure to what's going on in emerging markets by buying companies in developed markets who do business in emerging markets.

bowlhead99

TCA wrote: »

You've probably answered indirectly already but I'm not getting it - my simple question - would any of you buy an emerging markets investment trust?

Yes. An IT is one of the better ways of accessing emerging markets:
1) Ignoring the entity type (IT, OEIC, unit trust, partnership, whatever), active management is essential in imperfect markets which contain a lot of dross, and a number of active managers have long term returns consistently higher than the indexes.

2) having a fixed pool of capital to manage has to be easier/more efficient than constantly buying and selling assets to meet subscriptions and redemptions in an open ended fund, and some of the successful open ended ones are now getting pretty big which make it difficult to deploy all the cash efficiently across the managers' favoured shares (some have soft-closed for this reason).

3) prices of ITs get dragged around compared to their underlying NAVs, driven by sentiment to the market and manager, which can create extra opportunities. Also they can be bought and sold in real time.

So yes I do have IT investments in EMs

And in particular TEM?

Yes, that's one of them. This time last year, give or take a week I bought £2.5k of it for 5.50ish in one of my accounts when the NAV was 5.99, now it is 15p higher with a 15p higher NAV, ish, having been quite a bit higher for most of the time in between.

Back in March I sold a fifth of the above holding for 6.66 when the NAV was 7.14. So actually the discount of 50p ish didn't really change over the course of the 20%+ rise. The other £2k of the original purchase is still in my account and now represents a smaller portion of the account than it used to, as the price is broadly back to where it was at the start while other things have gone up. I would still be a buyer at these prices, but there are other things competing for my cash both in that portfolio and in real life!

I do also have TEM in other accounts (including in a designated account for a child intended as a long long term hold) . Mobius seems a smart guy and is a bit of an industry pioneer, although it's questionable how hands on he still is or whether more of a figurehead - a bit like Warren Buffet I guess.

Obviously the opportunities are not quite the same as when he was investing EM funds 20-30 years ago, as every man and his dog are in the market with asian and EM funds these days ; some of the markets will naturally be reaching a level where growth reduces and the next frontier market becomes a mainstream emerging market while the last emerging market becomes a developed market.

EM still seems a sensible place to have a chunk of your investment but there is definitely a risk that the slowdown continues while (for example) China's government stimulus reduces, exacerbated by (for example) people going back to safer markets once developed market interest rates normalise. So you might find it cheaper to invest later rather than invest now, but of course you might not. Investing when something is 20%+ below its peak might be a perfectly sensible time to make your first purchase, even if it is several hundred percent higher than what it would have cost a number of years back.

Ark_Welder

TCA wrote: »

You've probably answered indirectly already but I'm not getting it - my simple question - would any of you buy an emerging markets investment trust? And in particular TEM?

A simple question, but no simple answer...

The problem with asking what we might do is that our reasons for our decisions aren't likely to match your own. For instance, right now I would not buy any EM fund primarily because there isn't anything around that I feel will bring enough to my portfolio to warrant it. Plus, I would have to sell an existing fund and there isn't anything that I want to get rid of: this being based on my wish to try and reduce the number of funds held, or at least to not increase them!

There are also the unanswerables just now of how an unwinding of QE might affect EMs and whether this would be more than in developed markets; any knock-on effects of changes to China's economy, especially on resource-rich countries; the rate of global growth, which includes the developed world. Also, whether large-cap EM companies with a global outlook are likely to perform any differently to large-cap DM companies that also have a global outlook: largely, whether the correlation that is Risk on, Risk off is likely to continue or whether economic fundamentals at both company and country level will become important again. So right now, whilst I see TEM's concentrated number of holdings as being a positive, they are in large caps and I already have exposure to this area from elsewhere in the portfolio and I don't feel the need to increase it further.

My preference would be for a small-cap EM fund because this ought to provide a greater level of diversification for me than would a large cap fund - and that is taking into account the comments in the previous paragraph. Whilst there are small-cap EM OEICs, I would prefer a closed-end fund because I think that there are more likely to be liquidity issues with EM small caps than with EM large caps, and this should be less of an issue for a closed-end fund.


I have held TEM in the past, but that was in the SIPP during its growth phase, and it wasn't a fund that I deemed to be appropriate to hold once that phase had ended.


There is probably enough here for you to be able to dismiss it as not being relevant to your own circumstances! But that is the problem with not-so-simple answers, or with a simple answer that is given without context. Perhaps look at your own current overall exposure to EMs, and also to large caps. Then decide whether you are content to see an increase in both of these areas.

atush

TCA wrote: »

You've probably answered indirectly already but I'm not getting it - my simple question - would any of you buy an emerging markets investment trust? And in particular TEM?

Well, I would (and have as I hold some already such as AA smaller companies).

But it is fun listening to the debate as well.