New Templeton Emerging Markets manager to ring the changes
The trust announced in July this year that Carlos Hardenberg was to take over from Mobius and while the incoming manager says he will stay true to fund’s “historic value orientation” he is set to increase the number of holdings and place more emphasis on risk controls.
Managed by Mobius since launch in 1989 the £1.2bn trust has historically held around 50 emerging market companies in its portfolio, with a concentrated top 10. Hardenberg has told Winterflood Investment Trusts that this is set to raise to between 80 and 120, with greater diversification and an increased focus on risk.
Indeed the new manager, who is supported by Chetan Sehgal, has completed a model portfolio for the trust which is 25‐30% different from the current investment trust portfolio and has a longer tail of holdings. Hardenberg and Sehgal have worked at Franklin Templeton for 13 and 20 years respectively, while Mobius will remain as a portfolio manager on the trust.
Investors will be hoping the new approach has a positive impact on performance as the trust has languished over recent years. According to FE the trust is bottom of its sector over one and three years following share price returns of -29% and -25.6% respectively. Over five years it has fallen 33% and the subsequent selling of the fund has lead its discount to net asset value to widen to its current level of 11.2%.
Simon Elliott, a research analyst at Winterfood Investment Trusts, expects there will be substantial pressure on the new management team to perform over the next few years and demonstrate their ability to use the extensive Templeton team to their advantage.
He says: “We suspect that this ‘new broom’ approach is partially a reaction to Templeton’s recent performance, which has been disappointing at a time when emerging markets in general have struggled.
“Behind the scenes there are clearly substantial changes to the way that the research team is organised. It is difficult to estimate how this will impact the fund’s performance but the managers are clearly focused on high conviction holdings.”