Templeton Emerging Markets IT - bad, good...bad?

aroominyork

What are people's thought about this IT? After a long period of under-perfomance under Mark Mobius it found its way under Carlos Hardenberg (except, of course, in the few months since I bought it). But this year, a couple of weeks after MM says he is retiring (at a decent age), the younger CH resigns. It doesn't feel good.

What I'm equally interested in is views about alternatives in emerging markets, and especially Baillie Gifford. I've only been DIYing for six months but I have a good feeling about this firm in eastern/emerging markets. I hold BGFD (Japan IT) and Ballie Gifford Global Alpha Growth (the open ended version of Monks IT), which are both doing fine (yes, I know, only six months in) and am tempted by Baillie Gifford Emerging Markets Growth.

I am probably trying to convince myself, but I see the firm as professional, well researched, not likely to take stupid risks. Can better informed forum members tell me whether their history confirms this or am I being drawn by a nice sounding name based in Edinburgh, a distance from the hubbub of the square mile?

ValiantSon

Well the Baillie Gifford fund is cheaper and has better performance, so you can make of that what you will.

bowlhead99

Their history has been great, relative to some other options. I hold the fund.

But to bear in mind:

Mobius might have been considered one of the fathers of emerging markets investing, making money in those markets before other people figured out how to do it, with a lot of success and credibility. Such experience is great, but the track record doesn't mean he'll be able to maintain a comparative advantage against the peer group forever. But he knows what he is doing and when you hear him speak or write he's clearly not making it up as he goes along. Despite what you say about it having "a long period of underperformance under Mobius", investors have long memories and if you ran the figures back to inception you would find they were still excellent on an annualised basis

After a while, he took a back seat and became more of a figurehead really and in a more 'chairmanly' role did not make the day to day granular management decisions he might have done in the early days anyway. Other people pulled the strings driving the performance. Now as you mention, the successor is moving on too. If the fund did well historically but its points of differentiation in terms of key management have moved on, it's only prudent to assume some 'edge', such that it was, may have been eroded with the staff turnover.

Of course, despite some leadership change, what Franklin Templeton have built up over the years is a solid investment management house with deep experience of investing in emerging markets. No matter who is at the helm, you can make the argument that this experience and the firm's on-the-ground, bottom up stock analysis with a diligent and disciplined approach will stand them in good stead against an index containing a lot of garbage in undeveloped inefficient markets. The processes and procedures don't go out of the window with a change of individual manager.

So, I have not dropped the fund from my or my mum's portfolio. However, sometimes when you do analysis of the returns from active fund managers you can see differences between phases of performance when individual manager join or leave the key roles on a particular fund. As such, outperformance may not persist through key personnel changes and it's sensible to keep your active managers under review.

My father uses a Baillie Gifford fund in his ISA for emerging markets exposure as it doesn't make sense for him and my mum to both use the same investment for their emerging markets exposure. BG have plenty of experience in Asia and emerging markets and have done a good job over the years. First State /Stewart know what they are doing too.

Prism

As I see it there are two types of funds that invest in emerging markets. The typical fund (which includes the two you mention) is basically invested heavily in China, and in particular Chinese tech and finance. You will see the same names in most of these funds - Alibaba, TSM, Tencent, Hon Hai (Foxconn) etc. You will probably want a fund that invests in these companies but I do think its risky to have such a large % to those single companies. The recent performance of these funds tends to come from those names. Tencent is up 800% in the last 5 years - will this continue?

Another option is to focus more on the emerging consumer so funds from Stewart Investors global emerging markets or Fundsmith FEET. Both of these have underperformed however as they do not invest in tech or finance to the same degree.

I have Baillie Gifford China and FEET.

economic

Prism wrote: »

As I see it there are two types of funds that invest in emerging markets. The typical fund (which includes the two you mention) is basically invested heavily in China, and in particular Chinese tech and finance. You will see the same names in most of these funds - Alibaba, TSM, Tencent, Hon Hai (Foxconn) etc. You will probably want a fund that invests in these companies but I do think its risky to have such a large % to those single companies. The recent performance of these funds tends to come from those names. Tencent is up 800% in the last 5 years - will this continue?

Another option is to focus more on the emerging consumer so funds from Stewart Investors global emerging markets or Fundsmith FEET. Both of these have underperformed however as they do not invest in tech or finance to the same degree.

I have Baillie Gifford China and FEET.

Are all your investments in active? If not then what and how much Have you got in passive?

Looking to invest my parents sipp which is all cash (luckily markets are falling!!)

Prism

economic wrote: »

Are all your investments in active? If not then what and how much Have you got in passive?

Looking to invest my parents sipp which is all cash (luckily markets are falling!!)

I'm about 20% passive - L&G Tech, L&G health and iShares Robotics. If I didn't have Fundsmith for my US stocks I would go passive for that too.

economic

Prism wrote: »

I'm about 20% passive - L&G Tech, L&G health and iShares Robotics. If I didn't have Fundsmith for my US stocks I would go passive for that too.

Can I ask what your active funds are? And how much of each you have in percentage. Also percentages of your passive funds?

Finding it difficult to come up with an allocation as it’s just seem arbitrary even though it feels right. But in reality there’s no actual reasoning behind the allocation. Do you have any thoughts on this?

jamei305

There was an article about Templeton Emerging Markets IT in the Daily Mail online published about two hours before the thread was started. That's definitely a tick in the "think twice before buying" box.

Glen_Clark

About 3 years ago I was looking to invest in EM. I usually just choose trusts on discount and JP Morgan EM had the most discount. Templeton had less, but a better long term record and was sort of recommended on here. So I put half in each. Templeton is up 38% and JP Morgan up 62%, both plus dividends. So I think I will go back to choosing them on the discount.

bowlhead99

Glen_Clark wrote: »

So I think I will go back to choosing them on the discount.

Pretty close at the moment then: JMG price by end of day Friday was 12.8% lower than Thursday's reported NAV, while TEM's price by end of day Friday was 12.56% lower than Thursday's NAV. Near as makes no difference so you might as well stick with the half in each approach if you think discount's the driver of prospective performance.

The two ITs have certainly had a different profile of returns over the period. NAV change for the calendar years ending 2015,16,17 was -5.3%, 29.9%, 27.9% at JPMorgan while it was -24.0%, +47.9%, +32.5% at Templeton.

I have TEM in my SIPP but in my workplace pension I have JPM Emerging Markets (no investment trusts available, just the open ended fund).

Prism

economic wrote: »

Can I ask what your active funds are? And how much of each you have in percentage. Also percentages of your passive funds?

Finding it difficult to come up with an allocation as it’s just seem arbitrary even though it feels right. But in reality there’s no actual reasoning behind the allocation. Do you have any thoughts on this?

Its arbitrary really - personal preference. I am roughly 50% Amarica, 25% EMEA and 25% Asia. I have posted an update here https://forums.moneysavingexpert.com/discussion/comment/73824388#Comment_73824388