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Fund guru likes to crisis-shop
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May 21, 1999: 8:51 p.m. ET
Manager Mark Mobius kept investing through global meltdown and won big
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NEW YORK (CNNfn) - When global markets started hemorrhaging in 1997, veteran fund manager Mark Mobius quietly went bargain shopping as most of the investing world scattered in a panic.
Two years later, his strategy is apparently paying off, as his Templeton Emerging Markets Fund and Templeton Developing Markets Fund have jumped to the top of their categories at fund-researcher Morningstar.
"We were investing at this terrible time when emerging markets were all going down, some by 90-odd percent, and we are now benefiting from that," Mobius recalled during an interview this week while on a trip to Florida. "You had one crisis after another. You had Russia, Brazil, Thailand. We were investing in all of them."
The Templeton Emerging Markets Fund (EMF), a closed-end fund, is up 57.14 percent year to date as of Thursday and is ranked in the 6th percentile in its category, Morningstar said.
A closed-end fund has a finite number of shares and trades at a premium or discount of its net asset value on the New York Stock Exchange. The Templeton fund is trading at a healthy 26.3 percent premium, according to Morningstar.
The Templeton Developing Markets Fund, with $2.2 billion in assets, is up 31.84 percent year to date as of Thursday, Morningstar said, pushing it to the 16th percentile in its category.
Mobius points to a number of reasons for the turnaround.
For one, the global crisis went much further that it might have because so many investors were caught short in leverage plays. Likewise, investors fled too far out of the currency market, so there's been a significant bounce-back. Interest rates have also rebounded in developed and emerging markets.
Plus, strategic investors around the world are flush with cash from big IPOs and mega-mergers that they're putting back in emerging markets, he said.
Mobius sees tremendous opportunities in countries such as Korea, Thailand, Hong Kong, South Africa, Brazil, Venezuela and Argentina, which quelled rumors of devaluation on Friday. The only country he'd avoid is Malaysia.
"We're very bullish on emerging markets right now because of valuations," Mobius said. "Valuations are so reasonable it makes sense to put money in."
A higher Consumer Price Index reading May 14, followed by a warning from the Fed on May 18 of a possible interest rate hike in the future, may have left some investors rattled.
TrimTabs.com, a California fund tracker, reported that inflows to U.S. equity funds dropped to $200 million for the five days ending May 19, from inflows of $5.8 billion in the previous week.
All equity funds, including international funds, had outflows during the same time ending May 19 of $900 million, compared with inflows of $7.5 billion in the previous week.
Mutual-fund pros were in Washington this week to talk about the outlook for the industry for the Investment Company Institute's annual membership meeting May 19-21. The ICI is an industry trade group based in Washington.
Among the speakers were Robert Pozen president of Fidelity Investments, and Vanguard Group Chairman John Brennan. Peter Lynch, the familiar face on those Fidelity ads on television, was keynote speaker.
Lynch's presentation included the "ten most dangerous things people say about stock prices." Number one on the list: "If it's gone down this much already, it can't go much lower." Number two: "If it's gone this high already, how can it possibly go higher?"
Pilgrim Baxter & Associates and one of its star managers, Jim McCall, are mired in a nasty court fight after he told the company he was leaving to take a job with Merrill Lynch Asset Management.
McCall sued on May 12 in Superior Court in Massachusetts, alleging Pilgrim Baxter breached an employment agreement, interfered with his business relationship with Merrill Lynch, and misled him into thinking he would receive a signing bonus. The contract is through 2002 but McCall said he was assured it wouldn't be enforced, court papers said.
Pilgrim Baxter sued two days later, alleging breach of contract.
A lawyer for McCall declined comment Friday. A spokesman for Pilgrim Baxter said, "McCall's allegations, which will be answered fully, are an attempt to break a valid and enforceable contract."
And lastly, here are some winners and losers for the week in emerging markets funds, according to Lipper Analytical Services.
At the top of the list is Lexington Troika Russia Fund, up 11.49 percent between May 13 and May 20 and up 61.74 percent year to date; followed by Pictet Eastern European fund, up 4.22 percent this week and up 16.97 percent year to date; and Kaminski Poland Fund, up 3.67 percent this week and up 14.40 percent year to date.
The three losers were Dreyfus Premier Emerging Markets Fund, class B shares, down 3.26 percent for the week but up 39.82 percent year to date; followed by Managers Emerging Markets Equity Fund, down 3.17 percent this week but up 26.49 percent year to date; and Lazard Emerging Markets Portfolio, institutional shares, down 2.88 percent for the week but up 21.47 percent year to date. 
-- Staff writer Martine Costello covers mutual funds for CNNfn.com. If you have any comments about mutual funds, you can contact her at cnnfn.interact@turner.com
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