Mark Mobius steps down from Templeton EM helm

Carlos Hardenberg, a senior vice-president and managing director in the Templeton Emerging Markets Group, will take over. However, Dr Mobius, aged 78, will continue to be a portfolio manager on the trust, as well as leading Templeton Emerging Markets Group. The trust's board says he will remain fully engaged in the team's research and investment activities.

The announcement follows a difficult period for the trust, which has lagged behind the MSCI Emerging Markets Index for the past five of its financial years. It also underperformed the index on a cumulative basis over one, three and five years, and is trading at a discount to net asset value (NAV) of 11 per cent.

One reason cited for the underperformance is its value investment approach, which has underperformed growth over the past five years. Also, over the trust's last financial year investments in materials, energy and financials were detrimental to performance.

But near-term losses will not be tolerated as much as they once were, even if the investments still appear to be in the value category.

"Dr Mobius recently admitted that the performance across the range of funds managed by his team has been hindered by slow reactions to macro events such as the fall in oil prices," added Garry White, chief investment commentator at Charles Stanley. "He said the team underestimated the impact the crude price plunge had on company valuations and the market view on associated companies."

However, Dr Mobius has a strong record in the longer term: over the past 10 years he returned 184 per cent compared with MSCI Emerging Markets Index's 135 per cent, points out Adrian Lowcock, head of investing at AXA Wealth.

Mr Hardenberg is senior vice-president, managing director for Turkey and director of frontier markets strategy. Before joining Franklin Templeton in 2002 he was an analyst in the corporate finance department at Bear Stearns International, and has worked in financial services since 1999.

Chetan Sehgal continues to serve as senior research analyst on the trust and is supported by 53 portfolio managers and analysts. Mr Sehgal is managing director for India, chief investment officer and director of small-cap strategy.

Analysts have mixed view on the management changes.

"The jury is still out in relation to Templeton Emerging Markets," comment analysts at Numis Securities. "However, we believe that it may be worth considering Genesis Emerging Markets (GSS) at a 9.3 per cent discount to NAV as an alternative - this fund is also managed through a bottom-up, value-oriented approach."

But analysts at Stifel have upgraded their 'negative' rating on Templeton Emerging Markets to 'neutral'.

"We always liked the trust's high conviction, value-oriented approach but were concerned about its reliance on its longstanding manager, Mark Mobius, with no obvious deputy," they say. "With Carlos Hardenberg now taking on the role of lead portfolio manager and Mr Mobius staying on as a portfolio manager, this has been addressed. Furthermore, we believe that eventually the value headwinds will subside, helping future performance."

They rate Genesis Emerging Markets, which has outperformed Templeton Emerging Markets over recent years, as 'positive'.

Performance of Templeton Emerging Markets vs Genesis Emerging Markets and key indices

Source: Winterflood & *Association of Investment Companies, as at 14 July 201