Investment guru with the world on his shoulders
Mark Mobius is the Pied Piper of emerging markets. AMANDA HALL speaks to him
about the turmoil in the global economy
MARK Mobius almost fell of his exercise bike in a London hotel gym early one morning last week. He was reading the financial pages and spied an article about the International Monetary Fund and how it is warming to the idea of establishing controls to restrict money flows around the world.
"If everyone adopts exchange controls, global investing as we know it may be over," says the 63-year-old American with no hair and a delivery so measured that if you are not paying close attention, it is easy to miss the significance of what he says.
To repeat: "Global investing as we know it may be over." Now, most ordinary people do not worry about that sort of thing. They might get a little anxious about interest rates over their cereal, but they do not give themselves a heart attack over the IMF.
But Mark Mobius is not an ordinary person. He is a guru. And in particular, he is a guru of emerging markets. In fact, he is the guru of emerging markets. And if you are the guru of emerging markets you worry very, very much about the IMF. Right now, you also worry very, very much about emerging markets because things are not looking good.
Dr J Mark Mobius, to give him his official title, is a fund manager. He works for Templeton Worldwide, the American mutual fund business and right now has about $10-billion of other people's money to look after. In fact, some of it is his own; he will not say how much it is, probably a few million dollars.
The bad news for Mobius is that a year ago that $10-billion was $14-billion. The money is spread between seven different funds and are all invested in the emerging markets of Asia, Russia, Eastern Europe and Latin America. Which explains why, in the last year, he has managed to lose $4-billion. If there is one place you did not want your pension invested in the past year, it was emerging markets.
In London, shares in his Emerging Markets Investment Trust - around 150p a year ago - are now languishing at 62.5p.
So what went wrong? Gurus are not meant to get it wrong; that is why they are gurus. After all, if the world's Pied Piper of emerging markets loses $4-billion in a year, what hope is there for the rest of us? He says he reduced his exposure to Russia and Thailand before the worst hit. "But we can't exit countries completely otherwise we'd end up with cash and that's not what our clients want."
And is President Clinton right when he says the world economy is facing its most serious challenge in half a century? "Yeah," he says, in between measured mouthfuls of muesli. "I would agree with that. It started in the emerging world and now it's spreading and it's going to impact America and Europe. Japan was already in trouble, but the real problems started with the devaluation of the Thai baht last year. I would say we are in a very critical situation because the rules of the game are beginning to fall apart." Given we have travelled at the speed of light from emerging markets to America to Europe to Japan and landed in Thailand, I am not exactly sure which rules and which game he is talking about.
"The new rules," he says, "in the open world order were that investors would be able to repatriate their capital and profits. Now with the move by Malaysia (to introduce currency controls that mean foreign investors are not free to take their money out), that rule is broken. So the international community is facing a possible shutdown of capital flows of more countries copy."
If you were hoping for some good news about the state of the global economy, you can stop reading now. Mobius has none to give. A huge 20% of his funds are now in cash, although he is just beginning to spot buying opportunities in Brazil, Poland, Thailand and SA. Countries to avoid at all cost, he says, are Nigeria and Ukraine.
As benefits an extraordinary man, Mobius leads an extraordinary life. Ask him where home is and he says he has two: one in Singapore and one in Hong Kong, but then he tells you he is only there for two months of the year. His parents were German, but he was born in Brooklyn and has spent more than 20 years living and working in Asia. Ask what he is up to this week and he tells you today and tomorrow he is in London meeting investors, then Germany, then Sweden and right now he is on his way to Tokyo.
No wonder he needs his own Gulfstream jet, waiting at Stansted Airport, to whisk him and his posse of eager young analysts around the globe. Five of them are sitting at the next table having breakfast: probably discussing the IMF, I imagine, and keeping a watchful eye on their master to see if it is time to go. In fact, those who know him say he needs to be managed on the time-keeping front - like most gurus, he probably has far more important things to worry about than time. But does he ever get lonely, leading that sort of life?
"Lonely?" he says, as if he cannot quite grasp what I mean. "No, I'm involved in work."
Mobius is really not like the rest of us. For starters he has more qualifications than most company boards have between them: bachelors and masters degree from Boston University, a PhD in economics and political science from Massachusetts Institute of Technology, not to mention his studies and the universities of Wisconsin, New Mexico and Kyoto. When he talks about money worries, he means the trillions of dollars that shoot round the world every day "in search of safety and income", not the balance on his current account.
Many emerging market countries, like Russia, he says, were simply not ready to open their markets to free-flowing global capital. While he points to the likes of George Soros and Julian Robertson of Tiger Management as the big hedge fund players, he says they cannot be blamed "because they are only playing the game according to the rules allowed by the authorities".
His solution to the impact of hedge fund shorting, radical though it sounds, is two-fold: close down the futures market and forbid people to short stocks.
As Mobius dashes off to his hotel room to put on his tie and jacket, I cannot help thinking that it is no wonder he does not lead an ordinary life. Anyone who chooses to immerse himself in the financial and political worlds of emerging markets, where terms like "illicit assets" appear on balance sheets, would never be happy trudging to the office at 9am and home at 6pm every day.
When I quiz him on his ideal holiday, I expect him to say he never takes them. Instead, he says Sardinia. "In one of those healthy hotels where they have mud baths, you know?"
Just the sort of thing a guru should do on holiday. - The Sunday Telegraph.