Super 60 rated funds list reshuffle

One fund has been removed from our list and one investment trust has been added.

interactive investor Super 60 rated funds list reshuffle: Templeton Emerging Markets Smaller Companies Fund out,  Mobius Investment Trust in 

interactive investor, the UK’s second-largest direct-to-consumer investment platform, has removed Templeton Emerging Markets Smaller Companies Fund from its “Super 60” rated list, while Mobius Investment Trust (LSE:MMIT) becomes a new entrant.

The removal of Templeton Emerging Markets Smaller Companies Fund, which featured on the ii Super 60 list of high-conviction investment ideas as an emerging markets smaller company option, follows an extended period of underperformance.

Templeton Emerging Markets Smaller Companies Fund is the second emerging markets-focused collective investment to be removed from ii’s Super 60 list. BlackRock Frontiers Investment Trust (LSE:BRFI) was removed from the list earlier this month for the same reason: an extended bout of underperformance.

The decision was made in line with our Super 60 methodology. The list is monitored continuously for events that include, but are not limited to, extended periods of underperformance and fund manager moves. The change was made after a formal in-depth review of the trust, which included asset class, sector and peer group analysis as well as meeting the manager and the team.

Dzmitry Lipski, head of funds research at interactive investor, says: “It is no secret that emerging markets have struggled in recent history owing to numerous headwinds including the US-China trade dispute, a general slowdown in global growth and, not least, the coronavirus pandemic. But Templeton Emerging Markets Smaller Companies’ extended period of underperformance simply could not be ignored, struggling to deliver against the index and being way more expensive than the passive options we like.

“We believe that investors who would like to gain exposure to this area of the market would better consider a broader emerging market fund that has the ability to invest in mid-caps and potentially frontier markets too – and that’s why we have replaced this fund with Mobius Investment Trust.”

New addition: Mobius Investment Trust

Mobius Investment Trust has been inaugurated on to ii’s Super 60 rated list following the removal of Templeton Emerging Markets Smaller Companies Fund and BlackRock Frontiers Investment Trust.

Following a review of the small universe of other actively managed frontier market funds and trusts, the interactive investor team agreed to take a broader approach in this category and look for an option that includes both emerging market small- and mid-cap stocks and frontier markets within its  investable universe.

Dzmitry Lipski continues: “The Mobius Investment Trust clearly stands out from the crowd, providing hands-on exposure to the emerging and frontier markets, while also focusing on environmental, social and governance (ESG) issues. The strategy was launched in 2018 and invests in a highly concentrated portfolio of around 25 to 30 stocks for the long term (five-plus years). The managers, industry veteran Mark Mobius and Carlos von Hardenberg, have a long and successful track record prior to 2018 of managing mandates in this specialist area of the market previously at Franklin Templeton. The trust has free rein to invest on the merits of individual stocks and regions, rather than following a strict benchmark.

“The investment process is well-defined and constructed from company screening and analysis based on a number of proprietary models, as well as meetings with company executives. Managers put strong focus on quality and select only companies that have demonstrated stability of cash flows and revenues tested through all market conditions. In addition to the growth opportunities and diversification benefits, it is their belief that due to the lower ESG standards in emerging and frontier markets, there is a strong potential for the fund to impact positive change.

“We also think that the team’s interests are closely aligned with those of their investors through a comprehensive performance-related bonus scheme and ownership in the business.”