Franklin Templeton twenty years in emerging markets

Franklin Templeton is celebrating twenty years in emerging markets. In 1987, the global investment group started the Templeton Emerging Markets Fund, the world's first such fund listed on a stock exchange with investments in emerging markets. At that stage assets under management totalled $ 100 million, growing to over $ 36 billion today.

The formal creation of "emerging markets" as a portfolio investment category took place in 1986 when the International Finance Corporation, a subsidiary of the World Bank, started to promote capital market development in less advanced countries. The IFC also came up with the more optimistic term "emerging markets" instead of referring to these regions as poor or underdeveloped. A market is classified as emerging if it is on the World Banks list of low and middle per capita income countries or has an underdeveloped capital market that represent only a small portion of gross national product.

Franklin Templeton's Mark Mobius headed up the pioneering team of two decades ago, embarking on a difficult mission to find appropriate investments in emerging markets. "In those days, very few regions were accessible to foreign interest, being constrained by strict foreign exchange controls, limitations on foreign investment, market illiquidity and lack of controls over the safekeeping of securities."

In the past twenty years, emerging markets have opened up significantly, starting with Brazil in the late 1980s, followed by Korea and Taiwan, the end of apartheid in South Africa in 1994, and easier access to Eastern European economies. More recently Russia and India have become target destinations for investment funds and China is now on everyone's radar.

Michael King, Franklin Templeton Regional Head for Africa, says that the group now invests in about 40 emerging markets with a potential universe of close to 70 markets globally. "We have a long-term investment approach to these younger markets, as we do for all our funds. This strategy is the same ground-up, long-term value approach implemented by founder Sir John Templeton over sixty years ago."

King explains that the investment philosophy in these markets is highly disciplined, aimed at achieving superior returns entirely through stock selection, rather than concentrating on issues such as market and currency forecasting, economic projections and asset allocations, which are rather used to support the investment process. "Our success in emerging markets is also attributable to our strong belief in visiting companies on-site. Our fund managers adopt a direct, first-hand approach and regularly go out to operations to discover highly attractive investments."

As emerging markets gain more prominence as an asset investment class, Franklin Templeton has evolved its product range to meet the needs of different investors in various countries. The number of funds under management has increased from just one to 35 and the investment database has expanded from a few hundred companies to a potential 19 000 securities.  The group's emerging markets team has grown from one research office in Hong Kong, opened in 1987, to 13 offices across the world, including Johannesburg.

Emerging markets went through a crisis towards the end of the 1990s, specifically those in the Far East, but have come through stronger than ever and are attracting billions of dollars of investment.

The emerging markets team lead by Mobius has received more than 100 prestigious awards globally from international organisations that include Standard & Poor's, Micropal, CNBC and Reuters. In 2006, Mobius was named as one of the "Top 100 Most Powerful and Influential People".