WEBVTT - Mark Mobius on Emerging Market Funds 0:00:00.080 --> 0:00:05.960 M. This is Mesters in Business with Very Renaults on 0:00:06.240 --> 0:00:11.600 Bluebird Radio. This weekend. On the podcast, I once again 0:00:11.760 --> 0:00:15.000 have an extra special guest, and I really mean an 0:00:15.000 --> 0:00:19.840 extra special guest. Dr Mark Mobius is a legend in 0:00:19.880 --> 0:00:24.040 the world of emerging market and frontier investing. He's one 0:00:24.079 --> 0:00:26.960 of the first people, first Americans, who went out and 0:00:27.200 --> 0:00:32.200 actually started kicking tires and looking at various companies all 0:00:32.240 --> 0:00:35.600 around the world. He's been doing this so long that 0:00:35.680 --> 0:00:41.440 when he first began, there were only six investable countries 0:00:41.960 --> 0:00:44.680 that you could put your money into. The rest of 0:00:44.680 --> 0:00:48.839 the world either didn't have public companies or public markets 0:00:49.240 --> 0:00:52.159 you couldn't get cash in, and now if there weren't custodians. 0:00:52.560 --> 0:00:57.600 It's amazing that this is the guy that essentially created 0:00:57.720 --> 0:00:59.920 e M. There were a couple of other folks doing 0:01:00.040 --> 0:01:02.920 something like this, but no one quite the way that 0:01:03.040 --> 0:01:07.200 Dr Mark Mobius uh did. I found this conversation to 0:01:07.200 --> 0:01:10.520 be absolutely fascinating. I had like another three hours worth 0:01:10.600 --> 0:01:14.240 of questions for him. We we barely got through an hour. 0:01:14.560 --> 0:01:17.080 If you're at all interested in what the process is 0:01:17.160 --> 0:01:20.360 like of doing e M investing, what you find that 0:01:20.520 --> 0:01:24.360 either makes you more enthusiastic about a company or a 0:01:24.360 --> 0:01:26.640 company you're enthusiastic that when you go and kick the 0:01:26.680 --> 0:01:30.040 tires you start to find out that hey, this isn't 0:01:30.280 --> 0:01:34.640 has presented. Um. This is just an absolutely tour to 0:01:34.720 --> 0:01:39.399 force fascinating conversation. So, with no further ado, my interview 0:01:39.560 --> 0:01:46.000 with Dr Mark Mobius. This is Mesters in Business with 0:01:46.160 --> 0:01:52.400 very Results on Bluebird Radio this week. My extra special 0:01:52.440 --> 0:01:55.920 guest is Dr Mark Mobius. He is the founding partner 0:01:56.040 --> 0:02:00.360 of Mobius Capital Partners. Previously, he spent forty years working 0:02:00.360 --> 0:02:05.440 and traveling in emerging market and frontier markets. Before Mobius 0:02:05.520 --> 0:02:10.120 launched in twenty eighteen, he worked with Franklin Templeton Investments 0:02:10.160 --> 0:02:13.760 for more than thirty years, where he was executive Chairman 0:02:13.840 --> 0:02:17.560 of the Templeton Emerging Market Groups. During his tenure there, 0:02:17.600 --> 0:02:20.600 he helped to expand the assets under management from a 0:02:20.720 --> 0:02:25.240 hundred million dollars to over fifty billion dollars throughout Asia, 0:02:25.320 --> 0:02:29.239 Latin America, Africa and Eastern Europe. UH he ran a 0:02:29.280 --> 0:02:33.600 series of open ends, closed ends and private uh e 0:02:33.840 --> 0:02:37.280 M funds, including private equity funds. He has also been 0:02:37.320 --> 0:02:41.720 on the World Banks Global Corporate Governance for him UH. 0:02:41.800 --> 0:02:46.240 Dr Mark Mobius welcome to Bloomberg. Thank you. It's great 0:02:46.280 --> 0:02:50.040 being we do so. That is quite a storied career. 0:02:50.120 --> 0:02:52.720 Let's start in the early parts of it. You you 0:02:52.800 --> 0:02:57.320 took a very different route than most people in finance. 0:02:57.400 --> 0:03:00.000 You worked at a talent agency. You were a community 0:03:00.040 --> 0:03:04.079 Asians teacher, a political consultant. And am I reading this right? 0:03:04.520 --> 0:03:08.800 Did did you actually market snoopy merchandise in Asia? Yeah? 0:03:09.600 --> 0:03:12.520 I did, that's right. Uh. When I was in Hong Kong, 0:03:12.600 --> 0:03:15.720 I had a consulting firm and one of my clients 0:03:15.960 --> 0:03:19.560 was looking for people to manufacture of products. So she 0:03:19.720 --> 0:03:24.280 had it was a company in San Francisco quoted Term Productions. 0:03:24.320 --> 0:03:27.280 They had the rights for all of the snoopy merchandise, 0:03:27.400 --> 0:03:30.760 all the penis missiondise and she asked me to look 0:03:30.760 --> 0:03:34.240 for manufacturers in Asia. And one day I said, why 0:03:34.240 --> 0:03:36.760 don't you start selling in Asia? And they didn't think 0:03:36.760 --> 0:03:38.840 about that, so they said why don't you do it? 0:03:38.880 --> 0:03:41.400 And of course that's how I got involved in distributing 0:03:41.760 --> 0:03:44.440 these products in Asia, or at least in Hong Kong 0:03:44.520 --> 0:03:47.640 and the greater China area. Is that how a kid 0:03:47.720 --> 0:03:50.520 from Hempstead you grew up like forty five minutes from 0:03:50.560 --> 0:03:52.960 where I'm I am right now? Is that how you 0:03:53.000 --> 0:03:57.000 got involved in international business and investing? That happened the 0:03:57.040 --> 0:04:00.400 way before that, because I got a scholarship to study 0:04:00.400 --> 0:04:04.520 in Japan after I got my master's degree at bu 0:04:05.000 --> 0:04:08.800 UM and that really changed my life because you know, 0:04:08.880 --> 0:04:12.480 the culture shock of being in Japan, completely different culture 0:04:13.240 --> 0:04:17.960 of an incredible country growing very rapidly at that time. Uh, 0:04:18.160 --> 0:04:21.159 that was really what changed me, and I decided to 0:04:21.200 --> 0:04:24.160 go back. I got my pH d and M I 0:04:24.240 --> 0:04:26.840 T and then went right back to Asian sat and 0:04:26.960 --> 0:04:33.520 working so Bu Masters Kyoto postgraduate work. M I T. 0:04:34.000 --> 0:04:38.520 pH d. You also studied at Wisconsin, Syracuse, New Mexico. 0:04:39.320 --> 0:04:42.760 That seems to be a very heavy focus on education. 0:04:43.920 --> 0:04:47.719 It was. I was a professional student. I really didn't 0:04:47.720 --> 0:04:51.200 want to leave a university UM and that's the reason 0:04:51.240 --> 0:04:53.880 why I did a sort of round robin of these 0:04:53.920 --> 0:04:57.560 different universities. But then finally when I got my pH d, 0:04:57.760 --> 0:05:00.680 I said, Okay, let's let's get real, let's find out 0:05:00.680 --> 0:05:02.640 what I you know, what I should be doing in 0:05:02.680 --> 0:05:05.560 this world. And how did you end up at the 0:05:05.760 --> 0:05:11.880 Mega International Investment Trust in Taiwan? Oh? That was? Yeah? 0:05:11.920 --> 0:05:16.760 International Investment Trust was they Before that, I was working 0:05:16.760 --> 0:05:20.560 for a broker in Hong Kong, uh it was a 0:05:20.600 --> 0:05:24.440 British broker because DaCosta, and they sent me to Taiwan 0:05:24.520 --> 0:05:27.640 to open an office and also sit on the board 0:05:27.680 --> 0:05:30.720 of a joint venture they had with local banks and 0:05:30.760 --> 0:05:34.640 some other British firms, which was the very first investment 0:05:34.680 --> 0:05:40.160 management firm in Taiwan called International Investment Trust Um. And 0:05:40.240 --> 0:05:42.480 eventually the guy that was running it to a left 0:05:42.520 --> 0:05:44.880 and I took over. So I became the head of 0:05:44.920 --> 0:05:48.520 that company, which they launched the Taiwan r OC Fund, 0:05:48.600 --> 0:05:52.160 which I think the remnants of it are still listed 0:05:52.160 --> 0:05:55.960 in New York, I believe. So over the course of 0:05:56.040 --> 0:05:59.880 your career, you've traveled well over a million miles, You've 0:06:00.000 --> 0:06:03.599 into a hundred and twelve countries. I have to ask 0:06:03.640 --> 0:06:05.800 what are some of your favorite places to travel and 0:06:06.000 --> 0:06:09.240 what are some of the favorite foods you've eaten. You know, 0:06:09.279 --> 0:06:12.160 it's really interesting when I racked my brains and try 0:06:12.200 --> 0:06:15.120 to figure out where I like it the best, I 0:06:15.200 --> 0:06:18.239 really can't come up with an answer because every place 0:06:18.279 --> 0:06:21.479 I've been I've liked in some way or another. But 0:06:21.960 --> 0:06:26.080 probably if you ask me right now, where would you 0:06:26.160 --> 0:06:29.520 like to be, and probably would be the beach at 0:06:29.760 --> 0:06:34.839 Rio de Janeiro in Brazil that might be a place 0:06:34.920 --> 0:06:38.880 that would be nice to be, or a beach at 0:06:39.000 --> 0:06:43.600 Cape Town, South Africa. I love bout or life. I 0:06:43.640 --> 0:06:46.719 love beaches and that sort of thing. But frankly, I 0:06:46.760 --> 0:06:51.520 lived in Japan and Korea and Taiwan, Philippines. I love 0:06:51.640 --> 0:06:54.520 all these places. I really can't think of anyone that's 0:06:54.520 --> 0:06:57.839 particularly favorite. Let's let's talk about food, because I recall 0:06:57.920 --> 0:07:02.599 you hearing you once say that you eight scorpions on toast? 0:07:03.080 --> 0:07:06.840 Is that right? Right? Is that sort of like a 0:07:06.839 --> 0:07:10.040 soft shell crabs? What do they actually taste like? Actually 0:07:10.120 --> 0:07:12.320 that was in Singapore in a in a restaurant that 0:07:12.440 --> 0:07:20.440 specialized in special sort of medicinely beneficial foods, supposedly, and 0:07:20.520 --> 0:07:23.240 this is scorpion on toast. It was sort of like 0:07:23.880 --> 0:07:27.200 eating crispy shrimp. But it had a little bit of 0:07:27.200 --> 0:07:29.320 a bite to it, you know, a little bit of 0:07:29.360 --> 0:07:33.720 a speed taste to it. And I assume they removed 0:07:33.800 --> 0:07:37.040 the poison first, or is that is that just digest 0:07:37.080 --> 0:07:40.320 they do. They do remove most of the poison, but 0:07:40.440 --> 0:07:43.240 some of the sting was still there. It's it was 0:07:43.360 --> 0:07:46.960 very similar to in Japan if you have had fugu 0:07:47.680 --> 0:07:52.679 the blowfishes, it still has this tinging sensation on your lips, 0:07:52.680 --> 0:07:56.800 which is supposed to be part of the experience. I 0:07:56.880 --> 0:08:01.280 understand Singapore has become the food capital of Asia. What's 0:08:01.280 --> 0:08:04.680 it like there? It is true, that's the Singapore has 0:08:04.840 --> 0:08:08.640 an incredible variety of dishes because you've got not only 0:08:08.760 --> 0:08:12.560 all the Chinese cuisines, which as you know, very varied. 0:08:12.600 --> 0:08:16.280 I mean you've got cuisines in China that go from 0:08:16.520 --> 0:08:20.720 very very spicy, too very bland, and so forth. But 0:08:20.800 --> 0:08:25.080 then you have the Malaysian and Indonesian foods, and added 0:08:25.120 --> 0:08:27.720 to that, of course, you have the Indians of foods. 0:08:27.800 --> 0:08:32.920 So it is true. It's Singapore is quite buried in 0:08:33.000 --> 0:08:37.679 its menu. Huh. Quite mouth watering. So let's talk a 0:08:37.720 --> 0:08:41.080 little bit about Franklin's Tappleton. No less than Sir John 0:08:41.160 --> 0:08:45.600 Templeton asked you to run their Emerging Markets division in 0:08:47.320 --> 0:08:49.280 tell us what e M was like back then. I 0:08:49.360 --> 0:08:51.760 have to think the world has changed a lot in 0:08:51.840 --> 0:08:55.760 the ensuing thirty plus years. Oh, that's for sure. I 0:08:55.760 --> 0:08:58.679 mean in nineteen eight seven, I was sitting there in 0:08:58.720 --> 0:09:04.080 Taiwan running these that uh, the the fund management company 0:09:04.080 --> 0:09:08.280 that was doing the Taiwan Fund International Investment Trust, and 0:09:08.360 --> 0:09:11.720 I get a call from actually one of the deputies 0:09:11.760 --> 0:09:15.560 of John Templeton. I had made presentations to him in 0:09:15.640 --> 0:09:18.880 his space in Nasal Bahama's a number of times, and 0:09:18.960 --> 0:09:22.360 I guess he remembered me. And uh, as you know, 0:09:22.600 --> 0:09:26.040 at that time, emerging markets were just the term was 0:09:26.120 --> 0:09:33.800 coined by the International Finance Organization and they had they 0:09:33.840 --> 0:09:37.160 had launched the Emerging Markets Fund, and then Templeman said 0:09:37.200 --> 0:09:39.800 that he wanted to do the same thing. So he 0:09:39.840 --> 0:09:43.080 approached me and said, let's raise a hundred million dollars 0:09:43.080 --> 0:09:48.439 in New York, uh and do this Emerging Markets Fund um. 0:09:48.600 --> 0:09:51.200 And it was a great temptation for me because it 0:09:51.520 --> 0:09:55.520 enabled me to really expand out of Taiwan into something 0:09:55.559 --> 0:09:58.400 really exciting. But it was a tough decision as well, 0:09:58.440 --> 0:10:01.400 because we didn't really know what I was getting into. 0:10:02.480 --> 0:10:06.640 And we opened a small office in Hong Kong, had 0:10:06.679 --> 0:10:10.160 I hired two analysts to Chinese analysts, who, by the way, 0:10:10.480 --> 0:10:12.760 stayed with me for the thirty years I was in 0:10:12.840 --> 0:10:17.440 frank And Yeah, and we started with only six countries. 0:10:17.480 --> 0:10:20.360 You must remember in those days, most countries did not 0:10:20.520 --> 0:10:25.440 welcome fun investment. Uh, they were also either socialists or communists, 0:10:25.440 --> 0:10:29.240 like China and Proussia. Eastern Europe was out of the question, 0:10:29.280 --> 0:10:32.480 of course. So we had only six markets in which 0:10:32.520 --> 0:10:36.520 to invest, and then we started the expanding. Gradually markets 0:10:36.520 --> 0:10:39.800 opened up and eventually we were investing in something like 0:10:40.160 --> 0:10:42.920 seventy different countries around the world. Do you recall what 0:10:42.920 --> 0:10:47.320 the original six countries were. They were Hong Kong, of course, 0:10:47.360 --> 0:10:55.400 the Philippines, Malaysia, Singapore, Thailand, and Mexico. H No Japan, 0:10:55.520 --> 0:10:58.839 No South Korea, that's right, No Japan, No South they 0:10:58.840 --> 0:11:01.720 were considered they were no longer considered e M countries. 0:11:02.520 --> 0:11:04.560 You know, actually it's tore It was, but it was 0:11:04.640 --> 0:11:07.400 closed for one reason or another. There were difficulties in 0:11:07.480 --> 0:11:09.760 getting in it. Must remember, you know, the whole idea 0:11:09.760 --> 0:11:14.080 of getting a custodian they keep your securities. All of 0:11:14.080 --> 0:11:17.839 these technical issues were there. And Japan, of course, had 0:11:17.840 --> 0:11:21.679 it graduated into a developed country by that time. So 0:11:21.800 --> 0:11:24.480 back in the n I'm going to assume there was 0:11:24.520 --> 0:11:27.800 no remote access. It was always boots on the ground. 0:11:27.920 --> 0:11:31.040 Is that how research was done? Oh, that's for sure. 0:11:31.720 --> 0:11:39.520 Don't forget no internet no laptop, computer, no cell phones. Um. 0:11:39.559 --> 0:11:43.120 You know, the technology has to really change things tremendously. 0:11:44.000 --> 0:11:46.840 So tell us what do you learn from traveling as 0:11:46.840 --> 0:11:50.800 opposed to just a phone call, assuming you can actually 0:11:50.840 --> 0:11:54.520 call anybody. Well, you know, it's true that we're able 0:11:54.559 --> 0:11:56.520 to do a lot on the phone these days, and 0:11:56.559 --> 0:11:59.959 particularly with video conferencing, because you could see the people. 0:12:00.800 --> 0:12:05.680 But there's nothing like being in a country, smelling the 0:12:05.840 --> 0:12:09.760 smells that you get, looking at the people, getting a 0:12:09.840 --> 0:12:13.400 feeling for how people are living. Um. And then you 0:12:13.440 --> 0:12:17.040 walk into a company, you look around, you observe what 0:12:17.160 --> 0:12:19.800 the nature of the company is like, what is the 0:12:19.880 --> 0:12:24.760 morale of the staff, etcetera, etcetera. So there's nothing that 0:12:24.840 --> 0:12:28.160 beats that being on the ground and seeing for yourself 0:12:28.240 --> 0:12:31.920 what's going on. UM. So we always think that it's 0:12:31.920 --> 0:12:35.599 important to be traveling and visiting companies as much as possible. 0:12:36.120 --> 0:12:38.600 So let's talk a little bit about your process. Is 0:12:38.640 --> 0:12:41.839 it top down you start in a country and then 0:12:41.920 --> 0:12:45.720 dig into individual companies or do you go bottoms up, 0:12:45.800 --> 0:12:48.360 start with the company and then work your way through 0:12:48.400 --> 0:12:52.720 that local either country or region. Well, we like to 0:12:52.760 --> 0:12:55.840 say that we're bottom up invests in the sense that 0:12:55.920 --> 0:12:59.800 we look at the companies intensely, but that doesn't mean 0:12:59.840 --> 0:13:05.800 we ignore the macro the top down approach because obviously, 0:13:06.080 --> 0:13:08.520 you know, let's say, if we wanted to invest in 0:13:08.559 --> 0:13:12.880 Sri Lanka today, Uh, obviously you don't have to look 0:13:12.920 --> 0:13:16.200 at what's happened to the currency, what's happened to interest rates, 0:13:16.280 --> 0:13:19.040 what the government is doing, what kind of restrictions are 0:13:19.040 --> 0:13:22.920 taking place, uh for foreign investors to invest, that sort 0:13:22.920 --> 0:13:30.079 of thing. But after those critical issues currency ability to 0:13:30.200 --> 0:13:33.559 move money in and out, then we dig in to 0:13:33.720 --> 0:13:37.480 the individual company because that's the key. Because one of 0:13:37.520 --> 0:13:40.160 the things that I found over the years that a 0:13:40.240 --> 0:13:44.640 company can survive in a very difficult environment, and you 0:13:44.679 --> 0:13:48.760 shouldn't be afraid to go into a country where the 0:13:48.880 --> 0:13:51.920 environment is not ideal as long as you can get 0:13:51.960 --> 0:13:55.679 money in and out. That's really the key. Even the currency, 0:13:56.280 --> 0:14:00.839 if the currency is declining or getting very very weak 0:14:01.440 --> 0:14:05.280 for one reason another, there's still opportunities because, for example, 0:14:05.320 --> 0:14:08.400 an export oriented company can do very well in such 0:14:08.400 --> 0:14:11.680 an environment because they're earning in dollars and their courts 0:14:11.720 --> 0:14:15.480 are in local currency. So uh, I would say, yeah, 0:14:15.600 --> 0:14:21.920 we're more ground up and more fundamentally company oriented in 0:14:22.000 --> 0:14:25.080 the way we approach things. So today I could fly 0:14:25.160 --> 0:14:28.600 into a different country where I don't speak the local language, 0:14:29.240 --> 0:14:32.440 use my iPhone with Google Translate or any one of 0:14:32.480 --> 0:14:36.680 a dozen other translation apps, and be able to communicate 0:14:36.720 --> 0:14:39.240 with people. What did you do back in the eighties 0:14:39.240 --> 0:14:42.840 and nineties, I'm assuming you don't speak dozens and dozens 0:14:42.840 --> 0:14:45.600 of languages. What happens when you show up and you're 0:14:45.640 --> 0:14:50.240 not fluent? Well, that's what they very interesting and great 0:14:51.000 --> 0:14:54.280 good thing that we found when we travel and went 0:14:54.360 --> 0:14:57.360 to these countries is that you always found people who 0:14:57.400 --> 0:15:02.600 spoke English, particularly and you were visiting listed companies, companies 0:15:02.640 --> 0:15:08.640 listed on various stock exchanges, which is where we were looking. Um. Inevitably, 0:15:08.680 --> 0:15:11.680 in every company you would find somebody who's going to 0:15:11.800 --> 0:15:15.160 be able to translate for you. And more often than not, 0:15:15.760 --> 0:15:20.840 the top management were English speaking, English educated, um, you know, 0:15:21.360 --> 0:15:24.360 so they were. It was quite easy to get information 0:15:24.880 --> 0:15:28.240 and get face to face communications with these people. There's 0:15:28.280 --> 0:15:32.000 some exceptions, but not that often. It was quite good 0:15:32.040 --> 0:15:36.040 and quite easy to get people to communicate. Um. And 0:15:36.120 --> 0:15:40.640 even if a company uh officials did not speak English, 0:15:40.960 --> 0:15:44.720 we were able to find translators easily enough. And who 0:15:44.760 --> 0:15:47.040 else did you speak to. I mean, obviously you spoke 0:15:47.080 --> 0:15:51.040 with management, but but did you speak to local customers 0:15:51.200 --> 0:15:55.920 or or workers at at various places. How comprehensive was 0:15:56.040 --> 0:16:01.520 your boots on the ground due diligence. Well, that's one 0:16:01.560 --> 0:16:05.360 thing we found much too to our chagrin, that don't 0:16:05.400 --> 0:16:09.200 talk to just the top management. We made many mistakes 0:16:09.240 --> 0:16:12.000 by just talking top management. But you've got to talk 0:16:12.040 --> 0:16:16.120 to the staff, talk to the customers, talk to competitors. 0:16:16.160 --> 0:16:20.640 Competitors are great source of information because if you have 0:16:20.720 --> 0:16:24.240 a competitor who is speaking very highly of the company, 0:16:24.280 --> 0:16:27.600 that's a pretty good sign of the quality of the 0:16:27.600 --> 0:16:30.800 company you're talking about. Uh. And then we also talk 0:16:30.880 --> 0:16:35.200 to government officials. You know, are there any transit transgressions 0:16:35.240 --> 0:16:37.720 on the part of the company, or any problems in 0:16:37.760 --> 0:16:42.200 the industry. So you really have to open up the 0:16:42.320 --> 0:16:45.680 wide variety of sources. And by the way, that's one 0:16:45.680 --> 0:16:47.720 of the advantages of being on the ground as well, 0:16:48.480 --> 0:16:51.040 to say the least. So when we look at the 0:16:51.160 --> 0:16:55.760 environment today, active by side managers they use a lot 0:16:55.800 --> 0:16:58.880 of financial models, they use big data, they have the 0:16:58.920 --> 0:17:02.480 ability to crunch a lot of economic assumptions. What was 0:17:02.520 --> 0:17:04.760 it like in the eighties and nineties. I'm going to 0:17:04.880 --> 0:17:10.240 assume you didn't have access to all that modern technology 0:17:10.280 --> 0:17:13.760 and AI. That's right, they were not available. Of course, 0:17:14.000 --> 0:17:16.159 I don't forget. This was the age before miss it, 0:17:16.680 --> 0:17:20.720 the mith It program, where you had to separate brokerage 0:17:20.840 --> 0:17:25.920 fees and research. Uh, and in those days we were 0:17:25.920 --> 0:17:28.200 able to get an awful lot of information pre of 0:17:28.320 --> 0:17:32.960 charge from brokers who we were dealing with. But you 0:17:33.040 --> 0:17:36.480 might not say pre charge because we're paying them brokerage commission, 0:17:36.560 --> 0:17:39.600 but we were going to give them owners anyway. So 0:17:40.200 --> 0:17:44.360 UM it was very easy to get information, a lot 0:17:44.400 --> 0:17:47.879 of research from brokers we're doing research, and they were 0:17:47.920 --> 0:17:56.639 also local research institutions who produced research. So gradually the 0:17:57.400 --> 0:17:59.800 knowledge built up. Of course, at the beginning in eight seven, 0:17:59.800 --> 0:18:06.400 there is almost nothing available, but by at time there 0:18:06.480 --> 0:18:10.440 was a lot of information throwing out of these various firms, 0:18:11.440 --> 0:18:14.680 really quite fascinating. So let's talk a little bit about 0:18:14.960 --> 0:18:20.680 UM traveling to different countries and hunting down specific companies. 0:18:21.200 --> 0:18:24.919 What do you recall as a particularly spectacular investment that 0:18:25.000 --> 0:18:29.000 you discovered after traveling to a country, and we're just 0:18:29.160 --> 0:18:33.919 really surprised by what you found researching a company, probably 0:18:33.960 --> 0:18:39.040 The best example was in China. Um. That was when 0:18:39.080 --> 0:18:43.000 we discovered a company that in China that made the 0:18:43.119 --> 0:18:48.680 gears for wind power companies. That it's about fifteen years ago. 0:18:49.119 --> 0:18:52.879 That's when you know, the whole area of wind power 0:18:53.160 --> 0:18:57.040 was coming up strong and this company was doing incredible work. 0:18:57.080 --> 0:19:00.840 We visited the factory and I noticed that the machine 0:19:00.840 --> 0:19:05.200 tools they were making were top notch, you know, automated 0:19:05.280 --> 0:19:07.960 machine tools, and they were doing very high quality work 0:19:08.400 --> 0:19:12.080 according to their customers. So we decided to invest in 0:19:12.080 --> 0:19:16.160 that company, and that turned out to be an incredible investment. 0:19:16.520 --> 0:19:21.080 Was you know, the double triple price we paid. So 0:19:21.160 --> 0:19:25.040 that was probably one good example of you know, doing 0:19:25.119 --> 0:19:29.000 on the ground research and finding something that other people 0:19:29.440 --> 0:19:32.160 were not noticing. And by the way, I think that's 0:19:32.160 --> 0:19:36.760 one of the features of good investing is finding something 0:19:36.800 --> 0:19:41.000 that other people are not finding. In other words, try 0:19:41.040 --> 0:19:44.840 to discover a company that has not been yet so 0:19:44.960 --> 0:19:48.920 called discovered by the market. What what about the opposite. 0:19:48.920 --> 0:19:52.040 Did you ever show up somewhere excited about a specific 0:19:52.040 --> 0:19:55.719 company and owing to discover, hey, this isn't what we 0:19:55.720 --> 0:20:01.040 were hoping for. Oh many, many, many times. Uh, and 0:20:01.080 --> 0:20:04.399 of course many times we were fooled by uh, the 0:20:04.440 --> 0:20:08.680 information we were getting um and you know, very very 0:20:08.720 --> 0:20:13.120 missteps along the way. It's it's it's it is the 0:20:13.119 --> 0:20:17.680 feature of investing anyway, as you know, but in emerging 0:20:17.720 --> 0:20:21.640 markets you have to be special and be very, very 0:20:21.840 --> 0:20:25.320 extra careful. So so when you started doing this in 0:20:25.359 --> 0:20:28.960 the late eighties, was anyone else from the United States 0:20:29.040 --> 0:20:33.960 or other US investment firms actually traveling the world looking 0:20:33.960 --> 0:20:37.360 at companies you sort of the Indiana Jones of this. 0:20:37.840 --> 0:20:42.040 How long did it take for other investment firms to say, hey, 0:20:42.080 --> 0:20:44.600 we need an e M or a developed x U 0:20:44.960 --> 0:20:48.199 s UM fund and we need someone like Mobius out 0:20:48.320 --> 0:20:52.119 kicking the tires. Well, it took about five years for 0:20:52.359 --> 0:20:55.560 you know, the field to grow where you know, once 0:20:55.560 --> 0:20:58.240 they saw the results that we were getting, a lot 0:20:58.240 --> 0:21:00.800 of people began to jump in the aggreing. And you 0:21:00.880 --> 0:21:04.720 must remember that the pioneer on this was the i 0:21:04.920 --> 0:21:09.600 f C, the International Finance Corporation. They started emerging markets 0:21:09.600 --> 0:21:12.760 and social funds about it liter earlier than we we 0:21:12.800 --> 0:21:16.679 started our funds. So they were on there, as you know, 0:21:16.760 --> 0:21:20.399 they were the precursor the index of course, there's capital 0:21:20.400 --> 0:21:23.920 and national was the They were the people that were 0:21:23.960 --> 0:21:28.919 doing researchers of companies all around the world. So you 0:21:29.240 --> 0:21:34.359 started venturing into Africa way earlier than just about everybody else. 0:21:34.760 --> 0:21:38.280 What led you to discover that continent and how I 0:21:38.320 --> 0:21:43.160 have the results been? Well, you know, as the assets expanded, 0:21:43.920 --> 0:21:48.320 we really had to find new opportunities everywhere, and Africa 0:21:48.440 --> 0:21:51.880 was wide open. It was just there was so much there. 0:21:51.960 --> 0:21:56.080 And of course visits initial business there really excited us 0:21:56.080 --> 0:21:59.160 because we realized this is ground that has not been 0:22:00.119 --> 0:22:06.400 uh killed in any direction, lots of opportunities where there's 0:22:06.480 --> 0:22:09.320 no information, which is an advantage because if you're on 0:22:09.400 --> 0:22:11.840 the ground, if you're able to travel these places and 0:22:11.880 --> 0:22:16.760 get information, then you have an edge on any competitor 0:22:16.760 --> 0:22:20.879 that wants to come in. So I saw tremendous opportunities 0:22:20.880 --> 0:22:25.360 in places like South Africa, in Nigeria, uh in Kenya, 0:22:25.480 --> 0:22:30.320 and of course Africa is so huge, there's so many countries, 0:22:30.440 --> 0:22:34.080 there's tremendous opportunities. Of course, the big challenge was to 0:22:34.160 --> 0:22:39.080 find a equity market of stock market and liquidity. Of course, 0:22:39.480 --> 0:22:43.840 one of the biggest challenges you get, of course is liquidity, 0:22:43.960 --> 0:22:49.159 getting enough liquidity to be able to invest significant amounts 0:22:49.160 --> 0:22:51.560 of money you have to be able to move in 0:22:51.640 --> 0:22:54.639 and out and not completely disrupt the price or the 0:22:54.680 --> 0:22:57.960 market exactly. And by the way, that was one of 0:22:58.000 --> 0:23:01.280 the reasons why we got involved in private equity because 0:23:01.280 --> 0:23:05.400 we found so many of these opportunities, but some of them, 0:23:05.400 --> 0:23:08.119 of course we're not listed. Some of them were listed, 0:23:08.160 --> 0:23:11.360 but there was no liquidity at all, and we decided, hey, 0:23:11.400 --> 0:23:15.119 why don't we do a private equity fund where you know, 0:23:15.240 --> 0:23:18.280 the holding periods for the clients would be five or 0:23:18.280 --> 0:23:22.320 six seven years. Then we can develop these companies uh 0:23:22.440 --> 0:23:24.840 and bringing them to the market with more liquidity as 0:23:24.880 --> 0:23:29.160 we expand. So that that was a very very good 0:23:29.160 --> 0:23:34.280 move for us. And anything stands out as a particularly 0:23:34.359 --> 0:23:38.640 exceptional or shocking story that didn't involve finance or a company. 0:23:38.680 --> 0:23:41.719 When you were when you were traveling all over the world, 0:23:41.760 --> 0:23:45.200 I have to imagine there were some pretty memorable snaff 0:23:45.200 --> 0:23:48.399 foods along the way. Well, we got caught in the 0:23:48.560 --> 0:23:52.480 revolution in in Philippines where they're shooting at the hotel 0:23:52.520 --> 0:23:55.480 and we were able to get out luckily by helicopter 0:23:55.560 --> 0:23:58.200 for the roof of the hotel. That was one example. 0:23:58.920 --> 0:24:03.280 But they were few post calls like that, but never 0:24:03.359 --> 0:24:05.760 deterred US for some reason. Maybe we were too innocent, 0:24:06.800 --> 0:24:10.440 but you know, we have to roll with the punches, 0:24:10.480 --> 0:24:14.200 so to speak. But there's always some kind of tremoil 0:24:14.280 --> 0:24:17.400 going on us. You know. I was recently in Sri 0:24:17.480 --> 0:24:21.280 Lanka and uh, you know, you can still work and 0:24:21.320 --> 0:24:25.760 you can still visit companies, but meanwhile people are demonstrating 0:24:25.760 --> 0:24:30.400 on the street. Wow, that's that's pretty amazing. So let's 0:24:30.400 --> 0:24:33.760 talk a little bit about emerging markets versus the United States. 0:24:33.880 --> 0:24:37.720 This I think the twelve or thirteenth year prior to 0:24:37.840 --> 0:24:43.160 two where the US has outperformed emerging markets. I think 0:24:43.200 --> 0:24:46.159 that's the longest run we've seen in a number of decades. 0:24:46.760 --> 0:24:49.360 What's it gonna take for e M to make its 0:24:49.440 --> 0:24:53.879 comeback against the United States and two? Maybe this is 0:24:53.880 --> 0:24:58.120 the year. That's a great question. Uh. One thing you've 0:24:58.200 --> 0:25:01.159 got to realize is that the world has changed to 0:25:01.240 --> 0:25:05.880 the extent that a lot of the emerging markets growth 0:25:07.160 --> 0:25:11.560 is now in the United States because US companies are 0:25:11.800 --> 0:25:17.600 manufacturing and selling and buying from emerging countries. When we 0:25:17.640 --> 0:25:22.200 saw in the whole premise of going into emerging markets 0:25:22.280 --> 0:25:25.600 was to capture the growth because these countries were these 0:25:25.640 --> 0:25:28.080 were the low and middle income countries on a per 0:25:28.080 --> 0:25:31.359 capita basis, UH, they were growing at more than double 0:25:31.440 --> 0:25:36.439 that of the developed countries US, Japan, Europe, Australia, New Zealand. UH. 0:25:36.760 --> 0:25:39.639 Now what's happened is that a lot of these companies, 0:25:39.800 --> 0:25:42.880 this is in the US, might even be called emerging 0:25:42.960 --> 0:25:46.800 market companies. For example, let's take Apple, Now what percent 0:25:46.840 --> 0:25:51.960 of their manufacturing is done in Asia, let's say, or elsewhere, 0:25:52.520 --> 0:25:56.280 and what percent of their sales are in emerging countries 0:25:56.359 --> 0:26:00.359 like China. So it's become much more different called to 0:26:00.440 --> 0:26:05.960 define what is an emerging market And if you travel 0:26:06.760 --> 0:26:10.760 to some of these countries, you'll be amazed at the growth, 0:26:11.440 --> 0:26:15.320