Index investing still wins in emerging markets

A regular reader sent me the following email: “If you get the chance, I would appreciate you including a piece about whether the Franklin Templeton Developing Markets (TEDMX) fund adds value. Its manager, Mark Mobius, is always quoted as the guru and pioneer of emerging markets investing. Does he do any better than a passive index fund would do over a 5 or 10 year period?”

Before looking specifically at Mobius’ record, it’s important to note that an argument often made by advocates of active management is that while indexing, or passive investing is the winning strategy in “efficient” markets — such as the large-cap stocks of developed countries — active management is the winning strategy in “inefficient markets.” And emerging markets are often considered the poster child for inefficient markets.

Returning to Mobius, let’s establish his credentials. He is executive chairman of the Templeton Emerging Markets Group and holds a doctoral degree from MIT. He has been involved in emerging markets for more than 40 years and has received numerous industry awards, including Bloomberg Markets Magazine’s “50 Most Influential People” in 2011, “Emerging Markets Equity Manager of the Year 2001” by International Money Marketing, and “Ten Top Money Managers of the 20th Century” in a 1999 Carson Group survey. He is clearly both an intelligent and extremely accomplished individual.

Read the rest of the article on CBS News.

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