Mobius Investment Trust 12 October 2023
Disclaimer
Disclosure – Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
Mobius Investment Trust (MMIT) invests in high quality growth companies in the small and mid-cap segments of the broad emerging and frontier markets universe. A focus on sustainable earnings growth and strong balance sheets is married to a prioritisation of companies with strong corporate governance and a healthy corporate culture.
The trust was the brainchild of industry veteran Mark Mobius and an old colleague of his, Carlos Hardenberg. Five years ago they launched an investment management boutique with a partnership structure, and launched MMIT as a long-term investment vehicle, investing significant amounts of their own savings in it. They look for company management teams which are long-term in their approach to their businesses, and aligned with the interests of shareholders. ESG has a critical role in the investment process, and they have augmented this with a ‘C’ for corporate culture. In their view, a healthy culture can be a good predictor of long-term success.
In the five years since launch, MMIT has performed well, delivering the highest NAV total return of any generalist emerging markets trust (see Performance). This has been delivered with a highly active portfolio, meaning highly concentrated and with sector, country and style exposures very different from the indices and peers (see Portfolio). The portfolio has c. 60% invested in technology companies of various types, with a focus on India and Taiwan.
At the time of writing, the shares trade on a discount to NAV of 7.6%. MMIT has traded on a premium at times when risk appetite has been higher, allowing the board to issue shares. This and performance have seen the trust grow, although it is still relatively small at £163m total assets.
MMIT has a lot of the features that can bring success to active management: a concentrated portfolio, a clear strategy and the courage to run a very different set of exposures to the index. This also brings with it the possibility for periods of underperformance too, which always has to be borne in mind: since the pandemic hit, the bias to India has helped and markets have overall favoured technology stocks too. It is conceivable that both these trends could reverse. However, in our view the secular opportunity in technology is undeniable, while India is one of the most interesting places for investment at the moment given the macroeconomic, geopolitical and regulatory fundamentals. Carlos and Mark do have a sensitivity to valuations in their approach which may be able to help them navigate changing trends in markets and could see the portfolio evolve over time.
Given the highly active approach, we think MMIT could be used as a complement to a more large-cap focussed fund. However, it could arguably be seen as an alternative to these, and as a way to invest in what should theoretically be companies with the best long-term growth potential (given SMIDs should be able to grow faster and further over the long run). However, this growth potential comes at a cost, with SMIDs also theoretically more likely to see volatility and take losses. As such, considering this and the relative risk that comes with a highly active strategy, investors will arguably need to have a higher ability and willingness to take risk to invest.
Bull
- High earnings growth potential in the portfolio and the universe of candidate stocks
- Engagement strategy offers ability to add value and encourage positive change
- Offers access to smaller companies and smaller countries which are often not held by mainstream funds
Bear
- Concentrated sector, country and single stock holdings increase the risks in these positions
- Small size of the portfolio means costs are relatively high
- Concentrated shareholder register and redemption facility could lead to technical issues in future
Fund History
