Marketing blamed for Templeton discount

Poor marketing of the 1.62bn Templeton Emerging Markets Investment Trust has been blamed for its consistent trading at a double-figure discount. Earlier this month the board of the trust announced it would consult shareholders regarding possible discount control measures after receiving a letter from a major shareholder.

City of London Investment Management, which owns 13% of the Mark Mobius-managed trust, sent an open letter to its chairman expressing concern that the discount has averaged 12% over the past year.

The letter stated: “We find this level of discount at this point in the emerging markets cycle to be unacceptable and are particularly concerned at the probability of the discount widening further when the emerging markets bull market comes to an end”. It suggested the company should “take the initiative to protect shareholder value and introduce effective discount control measures”.

According to City of London IM, Temit has effectively become an index tracker over the past five years. It added Templeton Asset Management may have “become too large, or has launched too many additional emerging markets products, as a result of which the management team has become overstretched”.

Charles Cade, head of research at Wins Investment Trusts, blames poor marketing of the fund by Franklin Templeton for its wide discount. “For the size of the fund, it does not have the type of profile it should,” he argues. “The profile of Mobius in the UK is far lower than it used to be. The problem is the group only runs one investment trust, so it does not seem geared to promoting it and to generate buyers on an ongoing basis.”

Following the trust’s preliminary results last week, the trust said it would consult shareholders to determine the future strategy of the company. It said it would hold an open meeting on February 7, at which all shareholders could express their views.

Franklin Templeton was unavailable for comment.