TEM.NZX - Templeton Emerging Markets Investment Trust Plc Ord Shares

[forest]

Investing in emerging markets if carried out wisely should be more profitable then investing in NZ. Now i realise to do this from NZ has its difficulties.
However we have TEM on the NZX which allows us to do just that. TEM never seem to get mentioned on this forum. I am wondering if anybody has invested in TEM and like to share some of their reasons why, or maybe some reasons why not to invest in TEM.NZ

Appreciate any replies, Forest

[Lizard]

I have held TEM successfully for quite some time. Can't say I follow closely, but it has been the best performing of my overseas investment trust holdings, including other Asian funds held via LSE. Being able to hold/trade on NZX is a nice advantage.

[darksentinel]

It's one of the stocks that I consider to be promising, but haven't bought it myself. If we see some stability in markets, Euro and USD then this ll definitely be something I will look at investing in.

[POSSUM THE CAT]

Forest is this exempt from the FIF regime. Unless it is it would be an absolute no no for me.

[whirly]

Yep Hold. Bought mine between 11 and 12. Purely for exposure to emerging markets. Easy as being on NZX. Holding Long Term.

[forest]

Possum interesting question, I am not to sure, maybe a accountant on this forum can explain the tax implications for both investing and trading TEM. Its important that we aware of our tax obligations.

[Snoopy]

Forest is this exempt from the FIF regime. Unless it is it would be an absolute no no for me.

TEM would certainly come under the FIF regime. But IMO, basing your investment decisions purely on tax considerations will lead to bad investment decisions. I guess the main consideration would be, does TEM have a net dividend yield of 1.65%? If it does, holding TEM will be cashflow positive for the holder. If not you will have to make sure you have enough income from other investments to cover your annual tax bill. It follows that if the underlying investment in TEM is good, then TEM should be a good long term investment for the holder.

SNOOPY

discl: do not hold TEM

[Beagle]

Possum interesting question, I am not to sure, maybe a accountant on this forum can explain the tax implications for both investing and trading TEM. Its important that we aware of our tax obligations.

I like TEM, I've owned them for quite a while and if you look at their long term performance since inception they're a stunner.
I'm an accountant and my understanding is that if you invest more than $50K N.Z. you are liable for all the calculations implicit in the FIF regime...that's a cost price of $50K per person or $100K for joint holders.

Stay under these limits and you're exempt from the FIF regime. Great stock to have as a growth component of a well diversfied portfolio.

[lissica]

I like TEM, I've owned them for quite a while and if you look at their long term performance since inception they're a stunner.
I'm an accountant and my understanding is that if you invest more than $50K N.Z. you are liable for all the calculations implicit in the FIF regime...that's a cost price of $50K per person or $100K for joint holders.

Stay under these limits and you're exempt from the FIF regime. Great stock to have as a growth component of a well diversfied portfolio.

Is that $50k in one investment or of your total overseas investments? And what if the initial investment was less than $50k and moved in value to greater than $50k?

[POSSUM THE CAT]

Snoopy Thanks for the confirmation, it is what I thought, It would for me have to be a very large investment to be worth the Hassle. And there are plenty of other investments that can be made. The inconvenience of this FIF regime has to be taken into consideration when choosing investments.

[forest]

TEM would certainly come under the FIF regime. But IMO, basing your investment decisions purely on tax considerations will lead to bad investment decisions. I guess the main consideration would be, does TEM have a net dividend yield of 1.65%? If it does, holding TEM will be cashflow positive for the holder. If not you will have to make sure you have enough income from other investments to cover your annual tax bill. It follows that if the underlying investment in TEM is good, then TEM should be a good long term investment for the holder.

SNOOPY

Thanks Snoopy and others for your replies, dividend yield for current share price of about $13.50 is app 0.6%. Just to clarify Snoopy, the FIF if investing over the tresshold does this mean tax on 5% of invested amount but no further tax on foreign dividends in NZ?

[Beagle]

Is that $50k in one investment or of your total overseas investments? And what if the initial investment was less than $50k and moved in value to greater than $50k?

Good questions. No problem if you start at under $50K and it grows, i.e. the exemption is based on the cost price. If you invest more than $50K you're in for a lot of drama with FIF calculations each year...good for us accountants, not so good for investors. I'll look into whether you can have more than one investment and still be exempt as soon as time allows, from memory, I seriously doubt it, but I'll get back to you on that one.

[Lizard]

The $50k is a total of purchase price for investments that fall under the FIF Regime. It applies to individual investors but (mostly) does not apply to trusts except for some exceptions.

It is possible to pay less tax under FIF in the following scenarios:

1. Buying investments at a yield greater than 5%
2. If your transaction would normally be on revenue account (i.e. trading) and you make (on average) more than 5% per trade.

There are a few other threads on FIF elsewhere.

After the initial effort to build a spreadsheet that worked, I haven't found it too much drama, other than twice as much record-keeping as previously. But by entering all the dividends and trades into a spreadsheet as I go, it has been a reasonably quick process to print out and complete the tax return at year end.

[lissica]

Thanks Roger and Liz, will look into it. What about companies, is it the same as with trusts?

[whirly]

If you invest more than $50K you're in for a lot of drama with FIF calculations each year...good for us accountants, not so good for investors.

Agreed. That's what accountants are for though. Mine earns his dosh. I give him a rather messy pile of paperwork each year, he asks me a dozen questions. I pay the bill. Easy.

[Beagle]

Thanks Roger and Liz, will look into it. What about companies, is it the same as with trusts?

Here's a link to it. I run a small sole practice and don't have any clients with exposure to the FIF regime so, I'm sorry I don't have an intricate knowledge of the subject.

I like to keep life as simple as possible so I put in less than $50K in Templeton Emerging markets and that's my one shot at the emerging market growth story.

http://www.ird.govt.nz/toii/fif/changes/

[lissica]

Here's a link to it. I run a small sole practice and don't have any clients with exposure to the FIF regime so, I'm sorry I don't have an intricate knowledge of the subject.

I like to keep life as simple as possible so I put in less than $50K in Templeton Emerging markets and that's my one shot at the emerging market growth story.

http://www.ird.govt.nz/toii/fif/changes/

Thanks again Roger. I had a look at this when the FIF first came out, and made sure that all our shares qualify to be excluded from the FIF (ie our Australian holdings mainly). But yeah, I've been thinking about diversifying out of just Australia and NZ too. Will read up on that link, thanks

[Beagle]

Thanks again Roger. I had a look at this when the FIF first came out, and made sure that all our shares qualify to be excluded from the FIF (ie our Australian holdings mainly). But yeah, I've been thinking about diversifying out of just Australia and NZ too. Will read up on that link, thanks

You're welcome. I find it hard to target growth stocks in N.Z. as the only ones I like, e.g. Ryman are very expensive on a P/E basis. Call me a cynic but I think the effects of the GFC have many years to work there way out of the global system so I'm more interested it investments that can pay a sustainable and decent dividend yield. KIP is my top pick in this regard and being part of the PIE regime they're paying a tax paid 7% return. Low risk and very attractive divvy yield is the way to go for the next few years in my opinion, but I've become more conservative after being beaten around the head by the GFC, but who hasn't ?

[777]

I also do my calculation by spreadsheet but then redo it using the IRD calculator just to back up my figures. The calculator once you work out how to cover all the transactions does work well. Still garbage in garbage out if you don't do it correctly. I have had to pay less tax since the new FDR has applied as the 5% has always been less than the distributions I used to pay tax on. As well one year I paid nothing because of reduction in value of investments. They recovered the next year.

https://interact1.ird.govt.nz/forms/fifcalc/

[Snoopy]

Just to clarify Snoopy, the FIF if investing over the tresshold does this mean tax on 5% of invested amount but no further tax on foreign dividends in NZ?


Income under FIF is 'deemed' 5% of the financial year total sum opening balance of all of your 'overseas' (excludes most Australian) investments. Marginal tax rate is 33%? Then the tax you will pay on you FIF opening balance is 0.33 x 5%= 1.65%. Usually there will be some overseas tax deducted on overseas dividends (which are not separately declarable in NZ), that may be offset against your deemed NZ FIF tax liability. But a UK listed market 'tax credit' is not claimable as offsetting your NZ tax bill, because that 'tax credit' is in effect a UK bonus savings incentive for UK residents. UK dividends are paid without any withholding tax deducted, which is why you get no UK w/h tax credit in NZ.

SNOOPY

[777]

Just a small comment on snoopy's post. He states "excludes most Australian investments". Correct when deals with shares but the FIF does include all fund investments. Some funds though must be done under the CV method not the FDR method. They are found on the IRD website. Otherwise a good post.

[Traderx]

Hi all

Basic question which I can't seem to find an answer to on IRD website hope you can help.

If you are under the $50k FIF threshold can you still elect to be taxed by FDR?

Scenario: a lot of aussie unit trust funds etc pay out large distributions of cap gains etc (platinum funds for example), which i think would be taxable in NZ as a dividend/distribution, so could you elect to be under FDR even if you are under the $50k threshold so that you limit your "return" to 5%?

[777]

I am sure you can but once choosing that method then you would have to continue with it. No "cherry picking" so to speak. It is exemption to the FIF rules so by my interpretation it is up to you whether you wish to take up the exemption or not.

[Snoopy]

Hi all

Basic question which I can't seem to find an answer to on IRD website hope you can help.

If you are under the $50k FIF threshold can you still elect to be taxed by FDR?

Scenario: a lot of aussie unit trust funds etc pay out large distributions of cap gains etc (platinum funds for example), which i think would be taxable in NZ as a dividend/distribution, so could you elect to be under FDR even if you are under the $50k threshold so that you limit your "return" to 5%?

I would say unlikely Traderx, which is probably why you can't find it on the IRD website. The $50,000 FIF limit was to allow small (sic) investors to duck under the paperwork requirments of the FIF regime. Peter Dunne thought it would be unfair to demand the more complicated paperwork from such investors. IOW the cost of the paperwork wouldn't justify the extra tax brought in. I put it like that because Dunne was under the impression that FIF taxpayers would generally pay more tax as a result of the FIF scheme. Over the long term I think he is right, although for any particular year that is not necessarily so. For a growth investment over the long term I think you will be worse off under FIF. I don't think it is too smart to try and join the FIF brigade if you don't have to!

SNOOPY

[Snoopy]

Just a small comment on snoopy's post. He states "excludes most Australian investments". Correct when deals with shares but the FIF does include all fund investments. Some funds though must be done under the CV method not the FDR method. They are found on the IRD website.

One loophole that Dunne wanted to plug was investors buying funds in Australia that held worldwide shares, and hence escaping the FIF net. That is why Australian unit trusts are generally captured under the FIF regime. Westfield is one such example, as they own property in the USA and Europe as well as Australasia. But what about the new Westfield float that only holds properties in Australasia?

SNOOPY

[Lizard]

I don't think you can technically elect to join FIF regime if under the $50k, but unless you are obviously well out of reach, I doubt IRD would bother to audit your entry price. In fact, I suspect they would prefer not to audit any returns on FIF calcs and would only be incentivised to do so if they saw large $'s involved.

Re the company tax question, I have an inkling that companies will all be paying company tax rate on a comparative value basis for all shareholdings, so are not affected by FIF regime - long time since I checked this though, so don't trust my memory. Would think most companies would use an accountant?

[Lizard]

Okay, just to correct previous, I have been advised by a more expert ST member that companies generally WOULD use the FDR method. They cannot use comparative value, although they may have other choices. Legislation here (http://legislation.govt.nz/act/public/2007/0097/latest/DLM1515559.html) if you want to make sense of it.

[BlackPeter]

Time to accumulate?

http://www.marketwatch.com/story/7-reasons-to-buy-emerging-market-stocks-2014-01-28

looks like a long time anybody posted on this thread ... and the TEM share price trend currently does not provide a pretty sight. On the other hand - do we all assume that China, India, Brazil, Indonesia, Turkey, South Africa and Russia just quietly close down their economies? Well, maybe Russia will, given Putins attempts to play Hitler, but what about the rest of the countries? And even Russia should survive given that its gas fields are even larger than its level of corruption

Maybe the current share price is an opportunity to buy some more?

discl: holding;

[BlackPeter]

Light at the end of the tunnel?

TEM SP started to bounce (though still quite low) - and first somewhat positive news about emerging markets performance appearing on the internet ... just a warmer day in winter or is this the first sign of spring?

http://www.bloomberg.com/news/2014-04-04/dollar-falls-as-u-s-employers-add-fewer-workers-than-forecast.html

discl: holding

[Lizard]

Yes, I saw that too... maybe time to add again. :)

[psychic]

Thanks for waving the Tem flag, have dipped toe in today. Net asset value say $11.90, buybacks at $10.60. Like the look of holdings and exposure to these markets.

[psychic]

Another one where less chat = cap gain BlackPeter! Been doing ok has TEM.

[BlackPeter]

Another one where less chat = cap gain BlackPeter! Been doing ok has TEM.

So true. Admittedly not a NZ fund , which might explain some of the silence, but still, performed nice for me and has IMHO still lots of "puff" .

Discl: Happy holder

[Beagle]

I'm back into this after a period of absence. With the outlook for the N.Z. dollar looking less rosy and N.Z. stocks generally at very stretched level's TEM provides a very easy and cost effective way to add some broad diversification to one's portfolio. Keep it under $50K for an individual and avoid FIF fund hassles :)

[BlackPeter]

Keep it under $50K for an individual and avoid FIF fund hassles :)
Actually, given that it is a NZX traded share, are you sure it would fall under the FIF regime anyway? I guess not a real problem for me (under the limit), but I always assumed that for any NZX security it would be sufficient to report the dividends come tax return, and obviously traders would need to declare any capital gains.

Anybody who knows for sure, whether NZX traded TEM shares would be considered by IRD as domestic or as offshore investment?

[Beagle]

Lots of ETF's and other similar type funds listed here but being listed here doesn't exempt investors from the FIF regulations. Would be nice if it did.

[psychic]

I'm out this morning, sold to the existing bids at 11.55 and 11.50, but I see they didn't get touched... snapped up by ANZ somehow before the sell hit the board.
Not sure how equitable this jumping the queue is, but suppose it happens all the time.

Anyways, been a bit concerned about the falling nav. Another drop in this mornings announcement - not reflected in the closing trades on the London Stock Exchange Friday so asssuming the announcement will have some effect tonight. (?) One of the contributors will be the recent merger of Tata and CMC. TEM's second largest holding is Tata Consultancy, and it's SP fell 14% on the news - bit of a knee jerk maybe but enough in current market to make me withdraw into a cave for a spell.

Will read a bit more about Tata / CMC and reconsider position

edit - I've obviously read this all wrong judging by current asks TEM:NZ

http://articles.economictimes.indiatimes.com/2014-10-17/news/55148462_1_cmc-september-quarter-net-profit-crore

[Mista_Trix]

What charting do you use to read this stock??
Everything I try and look at seems to be broken.

Thanks :)

[BlackPeter]

What charting do you use to read this stock??
Everything I try and look at seems to be broken.

Thanks :)

Not sure, whether charting would be my preferred method to assess a fund like TEM (composed from a large number of independant shares) ... however: ANZ securities Super chart seems to work fine.

[BlackPeter]

Gosh - this stock seems to attract a lot of discussion ;);

Anyway ... despite the returns over the last 5 years or so have been all but stellar, TEM will be a useful vehicle to benefit from any recovery of the emerging (and particular Chinese) markets - obviously: if & when this recovery starts. TEM is for obvious reasons currently quite cheap compared to the last handful of years and likely to ramp up as soon as the Chinese flu is over.

Discl: holding (some) & obviously - DYOR;

[Beagle]

Timely reminder about this fund, thanks BP.

[Bjauck]

I read on the FT that the respected manager, Mark Mobius, was stepping down and that may recently have exerted an additional downward pressure on the TEM price. It is trading at quite a large discount to NAV. It has been underperforming its benchmark, so it will be interesting to see where the future management will take it.

[nextbigthing]

Hoop, not sure if you follow this thread, but if so would you be so kind as to comment on the chart? Looks interesting. Cheers, NBT

[kiora]

I owned some 20 yrs ago after recommendation from share broker,disappointing performance outcomes but I guess timing is everything with this one, sold eventually
They do pay a small dividend that needs to be calculated in

[Beagle]

Hoop, not sure if you follow this thread, but if so would you be so kind as to comment on the chart? Looks interesting. Cheers, NBT

The NZX chart does look absolutely horrendous at face value but you also need to factor in that this obviously has its primary listing on the U.K. market and when you start to consider the N.Z. SP should have found some meaningful support from the fall in the $Kiwi from ~50 pence all the way down to ~41 pence in recent months then the U.K. listing chart must look FAR worse :eek2:
If its underperforming the EM benchmark and has lost one of its best managers and has underperformed for some time as has been suggested above them maybe this isn't all its cracked up to be ?

Another Barramundi of sorts ?...or perhaps that's slightly harsh :)

[psychic]

Took a hammering with some of it's holdings including it's largest (>8% of fund) Brilliance China Automotive - the SP dropping from HK$18 to $8 last 52 weeks - but have a look at Brilliance now and you would probably say raging buy..

http://www.reuters.com/finance/stocks/analyst?symbol=1114.HK

They must have got out of India's Tata Consultancy that I mentioned in last post, emerging markets Banks/ Finance is the funds biggest sector at ~30%. Don't know what the mood currently is there.

Worth drilling down into the funds larger holdings and exposure to certain sectors to get a feel for what you are buying here.

For TA or people new to TEM, best to follow trading on the LSE as NZ just mirrors that, only with reduced liquidity.

http://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB0008829292GBGBXSTMM.html?lang=en

Keen to re-enter but bottom picking not something I'm good at.

[psychic]

Sorry Roger, just read your post. Agree - GBP/NZD a part of the equation here

[Onion]

I read on the FT that the respected manager, Mark Mobius, was stepping down and that may recently have exerted an additional downward pressure on the TEM price. It is trading at quite a large discount to NAV. It has been underperforming its benchmark, so it will be interesting to see where the future management will take it.

An article by Dr Mark Mobius, dated from June so predates a lot of the Chinese ructions of recent times.

http://www.iii.co.uk/articles/247198/outlook-emerging-markets


In my view, there is money still waiting to be invested around the globe, money which could continue to fuel global equity markets - even as the Fed is expected to start to raise interest rates in the United States.


In our view, stocks in many emerging markets are undervalued now (based on price/earnings and price/book values), and we believe there is still money in motion as central banks globally expand their balance sheets.

[BlackPeter]

The NZX chart does look absolutely horrendous at face value but you also need to factor in that this obviously has its primary listing on the U.K. market and when you start to consider the N.Z. SP should have found some meaningful support from the fall in the $Kiwi from ~50 pence all the way down to ~41 pence in recent months then the U.K. listing chart must look FAR worse :eek2:
If its underperforming the EM benchmark and has lost one of its best managers and has underperformed for some time as has been suggested above them maybe this isn't all its cracked up to be ?

Another Barramundi of sorts ?...or perhaps that's slightly harsh :)

Not sure about the comparison with Barramundi ... I guess at least TEM invest in stocks which are not that easy to buy yourself. They did as well quite well during the time the emerging markets flourished (up to 2010 / 2011) - with typically 2 digit returns over more than a decade.

Not sure whether I expect them to get long term back into this 2 digit growth mode, but I would expect some significant appreciation back into the band they used to move in over the last 5 years or so ($10 ... $12) if & when the Chinese flu is over (and I am rather sure, it will go - just not so sure, when).

[Beagle]

Yes fair comments BP and Psychic. For mine, using common sense technical indicators makes at least as much sense as anything else for this fund. I won't reconsider getting back in until it's clearly broken back up through the 100 day MA...however long that takes remains to be seen, could be quite a while I suspect.

[BlackPeter]

So - what do we think about TEM these days? Pretty depressed price reflecting the general feeling about the economy of the emerging markets.

On the other hand ...

* fuel is as cheap as it probably can get (which should be good for the automotive shares they own - e.g. Brilliance - 7.9% and Astra - 3.6%)
* China has still a huge growth rate - and Chinese share prices are back to more reasonable levels (25,6% of their shares are Chinese)
* lots of opportunities in Iran (don't think they hold currently, but it might be worthwhile to change that)
* oil price free fall seems to have stopped (improving market sentiment)

So - I guess unless we have an unfolding banking crisis (they do hold a number of emerging market banks - in Indonesia, Brasil and Thailand), things should look better from here.

Discl: not particularly happy, but at least modestly optimistic holder ... thinking about accumulating at these prices

PS: quarterly report is out: https://www.nzx.com/files/attachments/228778.pdf

[Beagle]

I'm most underwhelmed to be honest BP. What value are they adding for their fees of just over 1% per annum ?

They have badly underperformed the MSCI emerging markets index in the last year and also materially underperformed over the last 3 years, five years and more recently over the last 3 months.

I think the good fund managers they had at one stage left years ago. You might as well buy some ETF's mate.

I don't own and won't buy a fund that consistently underperforms.

[BlackPeter]

I'm most underwhelmed to be honest BP. What value are they adding for their fees of just over 1% per annum ?

They have badly underperformed the MSCI emerging markets index in the last year and also materially underperformed over the last 3 years, five years and more recently over the last 3 months.

I think the good fund managers they had at one stage left years ago. You might as well buy some ETF's mate.

I don't own and won't buy a fund that consistently underperforms.


Hi Roger,

fair enough ... they didn't perform that flash over the last 5 years or so. On the other hand - if you look at the reasons why they underperformed the MSCI - a big part of that is as well some overallocation in commodities.

Meaning - if we assume that commodities go further down the drain, than you are right. However, if we are around rock bottom, than now might be a good time to buy some overexposure in commodities.

Anyway - hindsight always gives you 20/20. I would not have bought them when I did - if I knew at that stage where they are now, but one of the reason they are in my portfolio is as well as hedge ... their price is quite uncorrelated to NZ stocks - which might be a better attribute in times the NZX is underperforming (i.e. not now).

[Beagle]

I know where you are coming from BP and agree commodities must be somewhere near the bottom of the cycle, surely ?

One huge disappointment we saw with the GFC was the way that so many of the markets got hammered together such that diversification strategies, at least in terms of diversifying stocks by country and region were rendered almost ineffective. I suspect we now live in such an interconnected world that diversification through this sort of avenue is perhaps not quite as effective as it once was but all the best with it mate.

[BlackPeter]

Sigh, I admit, there used to be a time when I thought that the emerging markets might long term beat ours. Well, maybe they do some time, but this may well be beyond my investment horizons.

This is a 10 year comparison of the TEM Emerging Markets fund and the NZX50:

10623

NZX50 (up 270% - gross index) is the yellowish line at the top and TEM (up 50%, maybe 75% if I add the in avg 2% dividends paid) the blue ripple at the bottom

The emerging markets suck ... well, at least this particular ETF.

Discl: Sold out years ago ... but for some reason is this stock still on my watchlist. Thought this comparison might be of interest.

[Leftfield]

Nice comparison Black Peter...... There's no doubt NZX has done v well (and some would regard it as an Emerging Market!!)

[Bjauck]

Nice comparison Black Peter...... There's no doubt NZX has done v well (and some would regard it as an Emerging Market!!)
Actually perhaps when it comes to investment markets it is the opposite of an emerging market - a retreating market. The NZ share market is losing listings and the NZ sharemarket capitalisation as a percent of GDP is declining (or static) over the ong-term. NZ household investment is still geared to investing in land.https://www.theglobaleconomy.com/New-Zealand/Stock_market_capitalization/

[mfd]

Surely the beauty of holding emerging markets is they add diversity and can be somewhat counter-cyclical to developed markets? No big deal if that part of your portfolio has been a little slow while the rest powers on.

I also don't hold at the moment - I'm not very good at practising what I preach.

[Joshuatree]

Thats certainly what the investment advisors recco, I think Craigs and maybe Brent Sheather had TEM as part of a diversified managed balanced portfolio. They were also taking management fees for this, natch.

[kiora]

Thats certainly what the investment advisors recco, I think Craigs and maybe Brent Sheather had TEM as part of a diversified managed balanced portfolio. They were also taking management fees for this, natch.

I brought these on Craigs recommendation 20? years ago.Sold them all 5 years later in disgust.They seem to be a continuous disapointment

[Jaa]

Sigh, I admit, there used to be a time when I thought that the emerging markets might long term beat ours. Well, maybe they do some time, but this may well be beyond my investment horizons.

This is a 10 year comparison of the TEM Emerging Markets fund and the NZX50:

10623

NZX50 (up 270% - gross index) is the yellowish line at the top and TEM (up 50%, maybe 75% if I add the in avg 2% dividends paid) the blue ripple at the bottom

The emerging markets suck ... well, at least this particular ETF.

Discl: Sold out years ago ... but for some reason is this stock still on my watchlist. Thought this comparison might be of interest.

I have also held TEM over this period and also been somewhat disappointed. I have always been impressed with how TEM has been run and the stock selection has seemed ok and the 1.02% ongoing charges fee reasonable for an active fund so the issue lies elsewhere.

TEM has even beaten its benchmark (https://www.temit.co.uk/investor/portfolio-and-performance#performance), the MSCI Emerging Markets Index. TEM share price has returned 131%* and the NAV 135%* versus 116% for the index over the last 10yrs. It has also outperformed the NZX ETF fund, EMF.

Having spent most of the last 10yrs living in emerging markets in Latin America and Asia I suspect I know what the issue is. While emerging markets have indeed grown faster than NZ and other developed markets they generally suffer a large trust and rule of law deficit. Thus the beneficiaries of this economic expansion tend to be corrupt government and company officials and well connected local business people who are all very successful at creaming the top off any good business idea/growth industry, leaving crumbs for public and institutional investors. Emerging markets are also highly nationalistic and do like seeing large profits head offshore so political risk is high too.

A Kiwi upbringing and commercial experience is poor preparation for how much of the world works. In essence a dollar of NZ earnings is far more valuable than a dollar of emerging markets earnings as it is less liable to suddenly disappear.

The safer way to play emerging markets is by investing in large multi-nationals with significant emerging markets exposure. e.g. Coca Cola, Yum Brands, Unilever, Procter & Gamble, Ikea, Louis Vuitton, Uniqlo/Zara, BHP/Rio Tinto etc. These companies attract some of the best talent in emerging markets as their workplace practices are light years ahead of the local companies and are thus seen as safe and highly desirable places to work.

* "Performance details are in sterling, include reinvested dividends net of basic rate UK tax and are net of management fees."