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.Quote:
Originally Posted by BlackPeter
TEM has even beaten its benchmark, 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."