Mark Mobius Goes Wide as Emerging Markets Go Global

This podcast is brought to you by HKEX, Asia's ETF Marketplace. Well, you'll find a gateway to liquidity and a diverse selection of opportunities across asset classes, sectors, and themes in Asia and beyond. Search HKEX to learn more. Good morning, good afternoon, good evening, and good nights, wherever you are in this vast, beautiful planet. Welcome to Tiger Money. This is a Bloomberg podcast about investing, financial markets and ETFs, capital chases, the best returns, and trillions of dollars have flowed into global ETFs in recent years, so let's listen to really how funds are transforming these markets along products, themes, and everything in between. I'm David Inglis, Bloomberg's non-award-winning journalist, strictly all-talk, especially no money. I'm also the chief market editor for the Asia Pacific Bloomberg TV, and I'm also the host of the China Show. And together with me is my co-pilot's ETF sage, and Tiger Mom, Rebecca Sin, she's head of Asia Pacific ETF Research. At Bloomberg Intelligence, Bloomberg's pop research departments, we have 500 analysts across the world covering more than 2,000 companies, 90 industries, and a hundred market benchmarks. Keep in mind, this conversation is strictly non-confidential. So if you like what you hear, do not forget to subscribe, to like, and of course, do share with everyone that you know. Rebecca. Thank you, David. Today we're very excited to have Dr. Mark Mobius join us on this conversation. He's one of the most successful and influential money managers in the past 30 years, and currently chairman of the Mobius Emerging Opportunity Fund. What you may not know is he didn't become a fund manager until he was in his 50s. Mark was hired by Sir John Templeton to run one of the first emerging market funds in 1987. At the time, he was tasked with opening Franklin Templeton's first Asia office and he picked Hong Kong where Dave and I are situated, where he was originally had a consulting business. Mark plans to launch a new hedge fund in September this year called the Mobius Emerging Opportunity Fund. By then, he'll be 88 years old. In his free time, he enjoys writing and has published 13 books with the most recent publication, The Book of Wealth, a young investor's guide to wealth and happiness. Welcome, Mark, and we're so excited to have you on Tiger Money. Thank you very much. Samarck, what's keeping you most busy at the moment? Well, of course, you know, the launch of the Mobius Emerging Opportunity Fund is really keeping me busy. You know, to launch a fund that interested in Delaware with the feeder in British Virgin Islands is a big undertaking. I was managing money so many years, Franklin Templeton, that I was never involved in the nitty gritty of all, you know, the legal side and the old mechanical side and the bureaucratic side, but now I'm involved in that and it's quite something. It's a big experience. Okay, so what do we expect the fund to launch? Just give us a sense of the timeline and where you are in the process at the moment. Well, September is the launch date and we're preparing very carefully to make sure everything is in order and so that's when money will go in and we'll start investing. And the approach, by the way, is very different from what I've done before in the sense that, as you know, emerging markets was where I really did most of my work in investing, but I'm calling it the emerging opportunities because I've seen how emerging markets have changed so much. You've seen a lot of these countries come up previously, you know, the way you defined an emerging market was the low and middle income countries on a per capita basis. And you have a situation now where Korea has got a per capita income higher than Spain. So is it an emerging market or not? That's one thing. The other thing is we found that a lot of these companies around the world are getting earnings and profits from emerging countries. So you have stocks listed in New York, which have a big share of their earnings and profits from China, India, wherever, all these emerging market countries. So we're going to look at opportunities globally, but particularly the high growth areas that's the idea. So you started out investing in EMs. Was it the mid-80s? Correct me from wrong, roughly? Yes, 87. 87. I mean, I would imagine that your investment universe now is just vastly larger than the pool of securities that you had to pick back then. And I'm wondering, is it more difficult these days or is it actually easier? Well, first of all, what we saw in 1987, I remember we opened up a small office in Hong Kong. It was the first overseas office that John Templin had. He was based in Bahamas, you know, at a little office, few offices in Florida, but that was that. So that was a big change. Number one, at that time we only had five markets in which to invest. Hong Kong, Philippines, Malaysia, Singapore, and Mexico, all these other markets were closed. You had either dictatorships or socialist countries that didn't believe in market economy, et cetera, et cetera. Of course, no China, no Russia, India was closed as well. You know, we then started the process of opening up these markets. And thanks to the IFC, the World Bank, economists finally concluded that in order to grow, in order to become a rich economy, you've got to have a market economy. And that's when things really began to change. At the end of the day, it was about 70 countries that we opened up and we started investing in the stocks in those countries. So it was incredible because we started with $100 million, which is so difficult to invest at that time. And by the way, that tied me in with my work at MIT. You know, I studied economics and political science at MIT. And at that time, the professors were asking the questions, how can we get these countries to grow? The so-called third world, the poorer countries. And some professors came up with the answer, you've got to build a power plant, you've got to build a railroad, whatever. But finally, they concluded you have to have a market economy. And that's really an incredible revolution that's taking place, and it's still taking place around the world. And at the peak, we had about $60 billion in emerging markets. That's just Franklin Templeton. Of course, there were many others that came in. So it's been a revolutionary change. So Mark, I'm curious what do you think? You know, there's been a massive change, and I'm stating the obvious here, from the time you started investing in '87 to fast forward over 30 years to where we are today. For one, there's just more EM markets to pick from. Then I would imagine what was your limited pool of choices back then. And the other is, you have this massive economy that's almost from zero, not quite, but all the way from zero to where it is today, which is China. Where does it leave China, for example, which has seen a lot of outflows, I should say, in recent years? You know, we've had an incredible wealth creation in China. The big change came in China when Deng Xiaoping said, look, I don't care if the cat is black or white, as long as it catches the mice. And he said, you know, it's glorious to be wealthy. That was a big, big change in attitude and strategy for China. Now India is coming along. But, you know, the story for China is not over. That's for sure. Yes, many investors lost money in the big downfall in the market, but that's a temporary thing as far as I'm concerned, because you have an incredibly productive nation. And yes, they overdid it on the property side. Just as Japan did, as you know, Japan went through the same process with a property boom and bust, but they will recover and they are now recovering, and we'll see the market come back. That's a fantastic example on bringing up the Japan analogy, because to some, that's actually a warning sign of what could become of China. Japan entered two and a half decades of deflation, and it did, you know, only now is starting to reemerge from it. So I guess what you're seeing is, and correct me from wrong, China is not Japan. There's a difference there. What is the difference in your view? The difference is that Japanese people tend to be very, very conservative and somewhat long term in their thinking. So when you have a crash like that, they tend to gour into the corner and say, look, we're not going to spend, we're going to save to make sure it doesn't happen again, etc., etc. With Chinese, they're much more flexible and much more enterprising in that sense. So the Chinese will get back to work, and they say, no, that was yesterday, it's today, and we're going to move forward and create new wealth. So China is going to be transformed from a property-oriented economy to more of a consumer-oriented economy, and you're going to see a big change, just as you're not beginning to see in Japan. I think from a funds perspective, we are definitely seeing that in terms of assets under management, our prediction is that China will surpass Japan in the coming years, just because we've seen so much growth coming out of China. This year alone, we've had the national team, which is a sovereign wealth fund of China invest close to $50 billion worth of ETFs into their own market, and so we think that the growth in China is going to be phenomenal in the coming years. If we shift gear to India, I mentioned India previously, India has had phenomenal growth from a fund polls perspective. We've seen a 116 billion in ETF assets. A lot of people are investing into India right now, and from a funds perspective, we've had new launches from Fidelity, GlobalX, HSBC, Mire, who have all launched ETFs tracking India. Following the election, how confident are you around the investment thesis surrounding India? Do you expect any structural reforms to be delayed or watered out? And if so, will this dilute your focus on India? I don't think the election will have much impact in that sense, because remember, Modi is still at the top. Of course, now he has to make peace with the opponents' bodies. But I think they all will realize that India has got to keep on the same track towards digitization, towards technology. And I think they're pretty much agreed on that. And you know, the interesting thing about India, I like to call India the United States of India, because these states are very different, one from the other. More different than what you see in China or the US or any other country. Different languages, different cultures. And the exciting thing is that one state with maybe 30 or 40 or 50 million people can create an economy that is quite productive and quite varied. So I think you can see India moving ahead, because these states compete with each other to be the best. And because Modi in his home state has started a more liberal investment system, which I think other states are going to copy. So that will attract more foreign investment. Part of the conversation we've seen recently, and this might be cyclical, right? So, you know, some of the weakness mark we've seen in the Chinese equity market has inevitably shifted some of the funds that would have been there. They've now played in India, maybe a lesser extent, some have gone to Japan. And some of the new strategies that have emerged because of that sort of phenomenon of flows is that some EM fund managers have started EMX China strategies, for example, some have started a purely India strategy because of the interest there. From someone who's been investing in EMs for a very long time, is it time to stop looking at this group as one? That's true. And that's the reason why my new fund is called the emerging opportunities because I think it doesn't make sense to just say, okay, I'm just going to go into India or go into China or go into emerging markets. You've got to look global. And of course, yes, emerging countries are growing faster than the developed countries. No question about that is double the growth rate. So therefore, there's going to be more opportunities in the emerging countries, but there are so many companies listed in New York and London, other developed markets where the companies are actually emerging market companies because their earnings are from the emerging countries like India, China, Brazil, and other countries like that. So we've got to widen our scope if we want to be good investors. If we shift gear and we look at where this crisis has been in elections issue, South Africa, Mexico, India in the past few weeks, do you think investors have been too complacent around pricing in election risk? And do you see any potential election risk down the road, especially with the UK and US elections coming up? You know, a lot of the election news and development is really peripheral to the market because at the end of the day, it's the economy that drives the market. If the economy is doing well, the regardless of who's in charge politically, then the market will do well. And in the case of the US, whether it's Biden or Trump, there may be some changes on the fringe, but the fundamental development of the economy is not going to change that much. Same thing is true with China, within India, it's the economy that really drives the markets rather than the political system. Now, of course, if you have a very dramatic change, for example, if Trump comes in and said, look, I'm going to eliminate capital gains tax, that's going to happen. Incredible impact. But it's unlikely to happen in the short term, that's for sure. There'll be a lot of discussion before something like that happens. This is an interesting case, right? So the US equity market has just outperformed almost consistently when you compare it to the EM basket, for example, right? And I think you and me, Mark, we were having a conversation. I forget which year was this a couple of years ago. And you brought up the point that you just made that if you simply take EM, there will always be a year where one EM market underperforms and drags the whole basket down. So I'm wondering what is the argument or what is the best case you can make against US exceptionalism? That there is a case to be made to be long EMs and simply not just leave your money and close your eyes and wait. Say in an S&P 500 ETF, for example. Well, if you look at the long term record, we're talking about from 1987 when the emerging markets index was formulated to now and the SB 500. According to the numbers I have, emerging markets are outperformed. So if you stayed in that, of course, a lot of people don't have the guts and the patience to do that. If you'd stayed in, you'd done better with emerging countries, but you've had incredible volatility. And recently you've seen emerging markets have outperformed certain periods the S&P 500. But as I mentioned, the S&P 500 now contains so many companies that are benefiting from the growth in emerging countries. So you've got to be aware of the fact that when you buy Apple, you are buying not the US market only, but you're buying China, India, etc., etc. So these countries are enabling the American companies, multinational companies to earn greater and greater profits. And therefore their stock reflects that. Right. So your MOBI is emerging opportunities fund that's about to come online. Are you saying that everything is fair game? So a company like Apple, which you correctly point out, you're effectively buying an EM stock if you think about it longer term because increasingly their pie is China, India. Tesla is another one, for example. Would you be, would the S&P 500 companies or would stocks in the US be part of your eligible investment universe is what I want to ask you? Yes, definitely. Yes, there's no question about that. And don't forget ADRs. Lots of ADRs are listed more and more. You can see emerging market companies listed in New York because of liquidity. This podcast is brought to you by HKEX, Asia's ETF Marketplace. Where you can get exposure to themes ranging from AI to virtual assets, small cap to large cap, greater China to global, search HKEX to learn more. So one of the questions we get asked a lot is can active and passive coexist? You know, you're an active fund manager, but we've seen a huge growth across passive ETFs AUM is at 13 trillion now. There's some estimates that say by 2033 it's going to reach 30 trillion, some say 2030. And so what are your thoughts around active and passive coexisting? Well, I love this differentiation because it enables us active managers to do better because as more and more people move into index stocks, we can then outperform because we can do something different. And I'll give you a good example of that. There were so many people who were in the emerging markets possibly. They were buying the emerging markets index and they got terribly burned when China went down because China represented 30% of the index. The index crashed. They got burned. In our case, we weren't in China at that time. So we benefited from this difference. I like the fact that more and more people are going into the indexed area because it gives the active managers more room to play. So to speak. Okay, so top of your head, rough estimation, what do you think your exposure breakdown would be for this fund? Would it be, for example, 20% India, 30% China? What would be your best guess at this point in time? At this stage, it would probably be something like I think 20% in India would be a good sounding point, 20% in Taiwan and mainland China, or maybe a little bit more. So that's from me 30% there. And then the rest in places like Brazil, Turkey, but believe it or not, despite the the evaluation of the Turkish leader is doing very well. And then maybe a little bit more in countries like Korea, Vietnam, Malaysia, Singapore, Indonesia. So in terms of investment opportunities, you've given us a breakdown from a geographical focus. Where do you think investment opportunities are? Key drivers of growth. For instance, in the funds base, we've seen a huge interest in virtual assets crypto, Bitcoin, Ether, AI has been a big theme. And a lot of people are incorporating AI into their investments in terms of virtual assets. ETF they've gathered more than 100 billion in assets under management this year. Tech has been a big theme for a lot of investors. You know, it's done very, very well in the past few years. Where do you think the investment opportunities are beyond geographical focus? Well, you're raising a very good point and that is the impact of technology on fund management itself. In our case with our new fund, we're using what they call a quantum mental approach. In other words, using quantum techniques plus fundamental systems. And of course, overlaying all of this is AI because with the AI tool, we can cover much more data like never before and much faster. So this combination of technologies is going to be really useful to us in running funds and not only for us, but for other fund managers. And now that related to that, of course, is where do you go in terms of picking stocks? And what I always emphasize when I'm looking at a company is to what degree is this company using technology to improve profitability and growth? Because without technology, a company is not going to do very well. They've got to move with the times and use technology to improve their operations. So it's a very important. In regards of what sector you're in, of course, currently, very attractive to go into the semiconductor space, particularly the software companies that do the software for semiconductors. But any company that's using technology in an effective way is going to be a winner. Well, what's the most important financial metric you use to value a company? I remember a few years back, you said, you don't use PE, for example, because that's not very useful guide to measure a company's true value. Yeah, it changes, you know, PE was very, very popular and is still very popular. And sometimes it's better not to use the same metric that other people are using. In our case, we like to use return on capital or return on assets. Number one, debt, low debt equity, and of course, earnings growth. Those would be three criteria that we look at very carefully. Right. And I'm curious, is there one market you would not touch? In other words, if one of your analysts came to you and said, Mark, I have an idea. Here's a stock, but it's listed in XXX. Great company, but it's in a certain market. Is there a market that you would go, no, take that away and throw it up in the trash can? Well, I mean, a country like Venezuela, you can forget, that's a bad place to be. No, the main criteria is not so much the political environment itself, but whether we can get money in and out of the country, very important. So with the first question we asked is number one, can we get money out? When we put money in, are there exchange controls or some other problem that will bar us from getting the money out? Number two, how about the currency? What kind of currency risk is there? And what kind of currency opportunity is there, by the way? Because a lot of times, like in the case of Turkey, a Turkish lira devalued by what 80 plus percent against the dollar, that provided an opportunity for many companies because some of the Turkish companies were exporting in dollars and the costs were in Turkish lira. So their profit gap was wider and wider as the currency devalued. So that's the kind of thing we look at. You've done everything in your career from winning awards to writing books to being one of the most influential people in finance. Why launch another fund right now? Well, thanks for the compliments. I don't know whether I've been that influential, but anyway, why a new fund? Because I like to try new things. I enjoy it. I don't necessarily need the money, but I like the idea of using the money I have to invest and also to try something new. That's really the reason. And of course, I enjoy travel. I enjoy meeting new companies. So it's just something that I love to do. Is it more a mental challenge for you then? I mean, delivering actual returns to investors is obviously important, but you know, your personal challenge when you look at investing and outperforming and all these things. I'm wondering if that's more personal. Then what seems to be the case? Well, you know, it's really interesting. I never really look at the performance in that sense. Of course, the clients and colleagues look at performance, but I don't, I look at what kind of companies we have. Are they profitable? Are they growing? Are they run by good people? And all the rest of it takes care of itself. So I think you have to be very careful not to be too focused on what your performance this week or this month or this year, but more focused on what the assets you have and how good they are, basically. Right. And do you think EM fund managers these days or just fund managers in general? Do you think they spend enough time actually speaking with management? I mean, how important is that to actually meet like literally meet the companies employees? It's very, very critical, very important because at the end of the day, companies are people. They're not things. They're people and companies are run by people and if those people are ethical and capable, then you want to put your money with them. You know, it's basically like we're in a partnership. And by the way, that's the exciting thing about going into equities and equity investing is because you are forming partnerships with the companies in which you're investing. So they're making money for you. So you've got to understand them and understand what their problems are and where the opportunities are through their eyes. So you mentioned people as being one of the most important factors. You've, of course, had a very successful career. What is one of the best career advice you would give someone? I think the most important thing in this field in investing is to be curious and humble. In other words, don't think that you know everything because you never do. There's always something to learn. One of the reasons why I like this business is because I've always been a perpetual student. In fact, I almost never left the university. I love to be learning in the university. So I think that's important. If you want to be in this business, you've got to be curious, humble and willing to learn and change your mind. You know, things are changing every day. You've got to be willing to adjust to a changing situation. Well, speaking of humility, what's your biggest investment regret? What's the one, Mark? What's the one that got away from Mr. Mobius? Well, it was in Brazil. We were invested in a department store and every two times a year we'd go back and talk to the financial director. Everything seemed to be great. Then suddenly the company was bankrupt and we couldn't understand why. And the mistake there, by the way, was that we didn't meet the owners, the people who were really controlling the company and understand their background and their problems. And so that was a big disaster. Well, that's the thing too. I feel in just as a side point, right? So this bifurcation between the US and China. So I understand geopolitically that's a rivalry that will continue. What's happened is, Mark, chime in. There seems to be a gap that's formed between the communities of both sides. So American investors who would have otherwise been happy to go to China, meet the companies, send their kids, study language, and vice versa. That's now started to recede as well. Are you optimistic that over time, while the rival recontinues that things normalize, relations normalize, simply on a people-to-people basis? Well, I think they will normalize. They already, if you look very closely and talk to Chinese people who travel around the world, you know that so many of them have their children in the US studying or visit the US often, have property in the US. I'm talking about the, of course, the wealthy people. But even on the ground in China, there's an open mind. This wonderful thing about the Chinese people is that they've got a global view. They travel around the world. They invest around the world. They ship products around the world. So I think it'll be very difficult to close the door between the US and China. It just, I don't see that happening. Sorry, Mike, I forgot to ask you as well. Since you're launching a new fund, do you have a target in mind? How much money do you want to raise? How big do you need the fund to get? Well, the most that we could do in this strategy would be about a billion dollars. But frankly, I prefer to have it maybe at 500 million around that range. Why is that? Simply because if you get too big, then it becomes more difficult to get liquidity, the kind of liquid stocks and the limited number of stocks you have in the portfolio. So we plan to have anywhere between 8 to 20 stocks no more than that in the portfolio. Wow. Okay. That's not a lot of stocks to begin with. Do you have a target in mind as far as performance or returns? I know that's a difficult question, but what would be ideal and achievable? Well, the ideal is to do better than what you would do by putting your money in the bank, putting your your money into treasury bonds. So we're talking about 10% annually or more in that range because you can't expect to get 50%, 20%, yes, one year you might get that, but it means taking a lot of risk. And that's one thing we don't want to do. So anywhere above 10% is where we want to be. If we look at emerging market funds, one of the questions we get asked a lot is, why do I need to invest in an active emerging fund when I can access an ETF for 70 basis points? So for instance, the ISHERS MSCI emerging market only charges 70 basis points. What are your thoughts on that? Very good point because that's one of the things that active managers have challenges about is the fee structure compared to ETFs. In our case, we're going to give clients the opportunity to have zero fee. In other words, no fee and only a carry. In other words, we take a percent of the profits we make above a certain amount. So that's the, I think, a much better way to run things because then you are really in partnership with your investors. Okay, Mark, one final question for you. Nothing to do with markets. I know you pretty much live in an airplane. You live in a jet. I see you sometimes in Singapore. I see you're in India. Your social media team, by the way, do a very good job because I see you enjoying Japan, for example. One day you're in Vietnam, the next day you're in Brazil. Give us your top three favorite places to live. I know you have residences all over the world. Let's put it that way. So what are your top three favorite spots? Well, I'm now in Dubai, so that's one. Singapore would be the other one in Hong Kong. Really? Those three are the best, I would say. Okay, and any go-to meal, like if I were to visit Dubai, what is something I have to try in Hong Kong? What is your go-to meal in Singapore? What would that be? Here in Dubai, you have so many choices, but perhaps some of the Lebanese food here is very, very good because that's terrific salads. They have terrific barbecues, that sort of thing. So Lebanese food here in Dubai would be good, but you know, you've got everything here. In Singapore, of course, it would be Singapore noodles. And in Hong Kong, it would be cats of these food, you know, incredible, certified vegetables, and that sort of thing. I really enjoy it. Mark, you'll have to let us know next time you come to Hong Kong. We'll take you up for some dim sum or some Hong Kong local food. I look forward to that. Thank you so much for joining us today. You've provided us a lot of insights from career to investments to markets. Thank you so much for your time and for making effort all the way from Dubai. Well, thank you. It's a pleasure speaking with you. See you in Hong Kong. And so our audience, thank you for joining us today and thank you for listening to The Tiger Money. You're a Bloomberg podcast about investing funds and financial markets in the region and beyond. If you like what you hear, please do not forget to subscribe to like and to share. Until next time, you can find us on the Bloomberg inside a terminal on LinkedIn and across other platforms as well. We look forward, by the way, to hearing from you. This podcast was produced by Claret Chin. Join Bloomberg in Los Angeles or via live stream on October 7th for the future investor finding the opportunities. This 2025 event series will examine how companies are investing in their businesses to create efficiencies, innovating their products and services and improving the customer experience. This series is presented by InvestcoQQQ. Register at bloomberglive.com/futureinvestorLA. That's bloomberglive.com/futureinvestorLA.