The UK's most respected emerging markets fund manager, Dr Mark Mobius, has come under attack from the largest shareholder in his Templeton Emerging Markets Investment Trust, and is facing calls to resign after more than 17 years managing the fund.
The City of London Investment Group, a boutique fund management operation that specialises in emerging markets, has urged the board of the trust to either sack Dr Mobius or to launch a share buy-back programme to narrow the discount between the fund's share price and the value of its assets.
The fund trades at a discount of just under 10 per cent to its net asset value, wider than all three of the other UK-listed global emerging market investment trusts. In an open letter to the board, the City of London Group accused Dr Mobius of running the fund in the style of an index tracking vehicle, with little active picking of stocks, and thus failing to merit the investment fees that his company Franklin Templeton takes from the fund.
The letter suggested one of the reasons for the fund's poor performance may be that the company is overstretching its emerging markets team.
The board of the trust has called an emergency shareholder meeting to discuss the concerns on 7 February. As yet, the City of London, which has a 13 per cent shareholding in the fund, has not tabled any formal motions to be voted on, either to oust Dr Mobius, or to force the trust to embark on a more aggressive programme of share buy-backs. However, the trust's chairman, Sir Ronald Hamper, has indicated that a change in the fund's buy-back policy may have the support of some other shareholders.
Last month, Sir Ronald claimed that the fund traded at a wider discount to its competitors because it is much larger and more liquid. However, he pointed out that the board had approved a motion to let the fund buy back up to 14.99 per cent of its shares at last year's AGM, and said the board would constantly keep the policy under review.
One supporter of Dr Mobius, the UK Shareholder Association launched a counter-attack on the City, claiming that its suggestion that the fund had performed poorly was "unjustified".
Figures from the independent analyst show the trust has returned 193.7 per cent over the past five years, and 112.3 per cent over the past three years. Over the latter period, the fund has performed worst out of the four global emerging market investment trusts.
The UKSA said it believed all of City of London's proposals, with the possible exception of limited share buy-backs, would be against the interests of long-term shareholders. "We are therefore asking our members to support the management," it said.Reuse content