SINGAPORE (Reuters) - Mark Mobius’ Templeton Asian Growth Fund is banking on commodity stocks to boost returns in 2010 following its best-ever yearly performance in 2009, when it benefited from big bets on companies such as Indian iron ore exporter Sesa Goa.
The $7.7 billion (4.7 billion pound) fund gained 103 percent last year, according to data from Lipper, handily beating the 72.5 percent rise in the MSCI Asia ex-Japan index. It was the 10th best performer among more than 600 Asia Ex-Japan focused equity funds tracked by Lipper.
The fund is weighted heavily in energy and materials, and Mobius said he expects demand for metals to exceed supply in the next few years, boosted by infrastructure development in large emerging markets such as China and India. Economic growth in emerging market has also boosted growth for soft commodities.
“As China grows richer, the (dietary) trend is changing to include more meats such as pork and beef. This means that more and more land is being allocated to raising cattle, thereby reducing the production of crops such as grains and oilseeds,” he said in an emailed response to queries from Reuters.
“Even though commodity prices will fluctuate from time to time, the overall trend globally is upwards.”
The strong returns of Mobius’ flagship Asia fund come after a torrid 2008, when it lost 60 percent compared with a 52 percent fall in the benchmark.
For a graphic on the fund’s performance, click:
here And since inception in 1991, the fund has cumulatively returned 194 percent, trailing the 335 percent return of the MSCI index, as per Lipper data. Lipper is a unit of Thomson Reuters.
Mobius’ willingness to defy conventional wisdom and take big risks can be seen in the Asian Growth Fund’s portfolio. Sesa Goa was its top holding as of end-November despite news a month earlier that the company was being investigated by India’s Serious Fraud Investigation Office.
“The Sesa Goa situation was something that occurred during previous managements... The relationship between the company and a buyer of ore, a trader getting commission and an investor is obviously complicated but as far as we can see, no harm was done to the operations of the company,” he said.
Sesa Goa shares rose five-fold last year despite the probe into offences allegedly committed prior to 2007 when London-listed Vedanta Resources VED.L took a majority stake.
Sesa Goa accounted for 6.2 percent of the Asian Growth Fund’s portfolio at end-November, up from 5 percent at the end of October, according to the fund’s latest fact sheet.
Templeton’s other big bet was on Thailand, which accounts for 22.9 percent of the fund’s portfolio despite concerns about the political situation there. The fund’s top Thai holdings include oil firm PTT (PTT.BK), Siam Commercial Bank (SMCBF.PK) and Siam Cement (SCC.BK).
The Thai stock market .SET rose 63 percent last year, bettering the performance of bigger Asian markets such as Hong Kong and Korea.
Click on for a table on Asian stock market performance in 2009.
The Templeton fund also has a 4.8 percent weighting in Pakistan .KSE, higher than its holding of companies listed in Hong Kong, Taiwan or Singapore.
“Yes, there is a risk but the potential reward could be significant. China is now making more investments and giving more aid to Pakistan,” Mobius said. “This is significant.”
Additional reporting by Nishant Kumar in MUMBAI; Editing by Muralikumar Anantharaman