Investment trust insider on Mobius Investment Trust – James Carthew: Award-winning Mobius takes cautious approach to emerging markets
One of the many deserving winners of Citywire’s Investment Trust Awards last week was Mobius (MMIT). True, it has given back about 17.5% of its net asset value over the past 12 months, but its track record since its launch in October 2018 is very good, with an underlying investment return of 24.7% versus 1.2% for the MSCI Emerging Markets index and 10.4% for the MSCI Frontier Markets benchmark. Only BlackRock Frontier Markets (BRFI) has done better.
The poor performance of emerging markets this year largely boils down to Russia’s invasion of Ukraine and China’s rigid adherence to its zero-Covid policy. Emerging market funds caught with Russian exposure quickly found that it was valueless; repeated lockdowns constrained Chinese demand and caused further damage to supply chains; soaring energy costs impacted energy importers; rampant inflation took hold in some countries and the US responded by raising rates, which strengthened the US dollar – which is always a negative for emerging markets. Investors have exited in droves and valuations are low.
This tale of woe also points us in the direction of the way out of this. Peace in Ukraine, a relaxation/abandonment of China’s zero-Covid policy, or signs that US rates have peaked could all lead to a sharp rally in emerging markets. However, MMIT fund manager Carlos Hardenberg does not see a quick end to the sector’s problems and the portfolio is positioned accordingly.
Hardenberg has just come back from Turkey, which is conducting a so far highly unsuccessful experiment of fighting inflation with low interest rates. He observes that… read more here