There is definite proof that sustainability-focused funds are outperforming their conventional counterparts. But some experts believe the traditional explanations for this are wrong.
Templeton Asset Management serves as the centre for the US-based Franklin Templeton Investments team of global emerging markets fund managers headed by the globe-trotting Mark Mobius. The fund house, which is among the early movers in investing in emerging markets, uses a bottom-up stock selection process based on extensive research and company visits. Its assets under management in emerging markets total around $33 billion.
ôHaving analysts on the ground in frontier markets like Vietnam benefits our company research efforts, enabling more frequent company visits and greater insight into how companies operate,ö says Mark Mobius, executive chairman of Templeton Asset Management.
ôVietnam is a young market, but the potential is immense. We believe it will grow to become one of AsiaÆs most important markets and we want to provide our investors with the opportunity to take advantage of that growth,ö he adds.
The Vietnam office has been operational since the start of this month, with two research analysts so far who are focused on equities research and report to Mobius. Templeton Asset Management already has a private equity fund thatÆs been tapping Vietnam for investment opportunities. It is run by Richard Piliero who also reports to Mobius. Piliero is based in Singapore, but has been spending increasing amounts of time in Vietnam looking for companies to invest in.
Templeton Asset Management may decide at a later date to have fund managers based in Vietnam, but that depends on the demands of clients and the speed of market development and financial sector liberalisation.
Templeton Asset Management is making it a point to monitor and contribute to the growth of the capital market in Vietnam. The fund house knows full well that the success of any endeavour in Vietnam depends largely on whether the market develops as fast and as strongly as generally expected.
ôWith more than 1,500 state-owned enterprises (SOEs), including banks, telecommunication and energy companies, the possibilities for privatisation and stock exchange listings in Vietnam is enormous,ö a spokesperson at Templeton Asset Management says. ôHowever, it will all depend on how fast the government moves towards a market economy and listings of state-owned enterprises. We expect that the market should continue to grow rapidly not only in size but also in depth.ö
Mobius û who has more than 20 years experience in investing in emerging markets û has been cautious about Vietnam in recent years, which is understandable because he's been burned by that market once before.
In September 1994, Mobius started the Templeton Vietnam Opportunities Fund, then the first US-listed Vietnam fund. That was just months after the US lifted its trade and investment embargo on Vietnam and Mobius expected the local stock exchange would be up and running within two years. He had no problems convincing investors and was able to raise $105 million, double his target. But after almost four years passed and no exchange appeared, the fund was restructured and renamed Templeton Vietnam and Southeast Asia Fund with a broader investment mandate. Templeton Asset ManagementÆs exposure in Vietnam has since then mainly been in the form of private equity investments.
The team in Vietnam is supported by more than 30 portfolio managers and analysts located in 14 emerging markets. The emerging markets team consists of investment professionals who represent 18 nationalities and speak a total of 19 different languages. Members of the team travel to more than 30 emerging market countries in a typical year, visiting nearly 1,500 companies to research emerging market investment opportunities.
The opening of the Vietnam rep office follows Franklin TempletonÆs entry into the Vietnamese market in February 2008 through the acquisition of a 49% stake in Vietcombank Fund Management, an investment management firm currently focused on private equity investments in Vietnam. The remaining 51% of Vietcombank Fund Management is owned by Vietcombank, the state-owned commercial bank.
Although VietnamÆs funds industry is still small and in its early stages, fund management companies that have been among the early movers have held an advantage in terms of fund raising and building a performance track record. So far, there are only three retail mutual funds in Vietnam, the first having been launched in 2004. There are around 100 so-called member funds, but these are not widely available to the public and are mainly offered to private individuals or certain companies that may want to invest in these portfolios.
Franklin Templeton intends to partner with Vietcombank to make its investment funds available to Vietnamese investors. Vietcombank is one of the big four state-owned commercial banks in Vietnam that make up a combined 65% of the banking system, so the partnership will likely open many doors for the US-based firm.
Approximately 9% of Franklin TempletonÆs assets under management are currently from investors in the Asia-Pacific region. It has no investments in Vietnam shares at the moment but the market will be a key area of focus in expanding the companyÆs penetration in Asia.
Vietcombank Fund Management was one of the first foreign joint venture fund management companies to be established in Vietnam. It is currently managing three private equity funds with a total investment capital of more than $160 million. Two of the funds are domestic member funds, but the fund house also broke ground in December 2006 by launching the first domestically managed foreign fund with a total capital of $120 million.
Franklin Templeton first established its presence in Asia-Pacific in the late-1980s and today has offices in mainland China, Hong Kong, India, Japan, Korea, Singapore and Australia.
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