Renowned emerging markets investor Mark Mobius to launch ESG fund manager for emerging and frontier markets

Mark Mobius, the renowned emerging markets investor, who retired last month from Franklin Templeton Investments, is making a surprise move in retirement by launching a fund management firm focused on ESG investments in emerging and frontier market companies. Mobius’ move follows that of another feted stockpicker, Terry Smith, the former CEO at Tullett Prebon and Collins Stewart whose fund management firm, Fundsmith, recently launched a sustainability fund based on exclusions targeting institutional investors, and signed up to the PRI. It confirms significant interest among long-term active managers in ESG products as drivers of investment performance over time. Mobius, who is now 81, announced his plans at an event in Mumbai, India, but said he could not name the new firm until its launch is approved by regulators in Luxembourg and London where the fund will be registered. He said the fund – open-ended and long-only – would have an explicit focus on improving the ESG standards of companies in emerging and frontier markets.
The Indian press reported that Mobius said: “The fund (will invest in) not only companies that are great in ESG, but also those that have the potential to improve their governance, and environment and social factors”.
Mobius, who left his post as executive chairman of Templeton Emerging Markets Group at Franklin Templeton Investments at the end of January, was in Mumbai to announce joining the investment panel of Mumbai-based early-stage venture capital fund Equanimity Investments, in which he is an investor.Mobius told the Financial News website: “Investors, particularly large institutional investors, are becoming more and more aware of their responsibility to foster better environmental, social and governance practices in the places where they make their equity and bond investments.
“There is a new generation of millennials who have become more interested in this area. Emerging markets are fertile grounds for environmental, social and governance improvements, so our desire is to have some impact through our investments and also garner good returns for our investors.”
He said emerging markets investing was going through the “throes of enormous change”. He said: “The big change, of course, is ETFs and how they have taken the lion’s share of new money going into mutual funds. This is true of all funds and holds true for the emerging market funds.
“Of course the objective of investors and their advisers is to reduce costs, and the fees of ETFs and other index funds are lower than actively managed funds. But the risks are clear: Buying an index fund or ETF means that you are buying what everyone else is buying – you are going with the herd and investing in a ‘dumb’ product.”
Mobius added: “The good news for us active managers is that forces us and encourages us to be truly independent and not follow an index. This means that the clients get something really different from the index and something that can be targeted to specific objective — such as environmental, social and governance objectives.”