Mark Mobius
In a move that caught nobody by surprise, Mark Mobius, together with his freshly-minted partners Carlos Hardenberg and Greg Konieczny, announced this week a launch of a new asset management company, Mobius Capital Partners.
Its first product, which the firm plans to launch in the UK and as a Luxembourg Sicav vehicle this summer, will specifically focus on environmental, social and corporate governance (ESG) factors.
However, unlike many other funds carrying the ESG label, Mobius’s new fund will not seek companies that score high on ESG metrics. Instead, his team will look for companies with relatively poor ESG practices and work directly with the management on improving them.
“We are interested in companies that do not meet those [ESG] standards yet, but are susceptible to improvements,” Mobius told FSA from his office in London. “We want to go in and say: Let’s work together with the management to improve their governance, and through that improve their social and environmental behaviour.”
The idea behind this approach stems from the understanding that poor governance standards in many emerging markets lead to investors’ higher perception of risk and therefore lower valuations.
“If we as investors can tackle this area and help these companies and countries to improve the oversight, regulation and transparency, then we believe that the market will be willing to pay a higher price for emerging market access,” said Hardenberg.
Greg Konieczny (left), Carlos Hardenberg (right)
Since Mobius’s new fund, at least at the start, will not have the clout of large activist shareholders who can force their views on companies purely by voting their shares, the firm plans to adopt a softer approach.
“In Africa or some of the smaller Latin American and South-East Asian countries you find a lot of companies that are really in the dark [about ESG],” said Hardenberg. “They are quite open to hearing from shareholders what they expect in terms of ESG, governance, oversight and transparency. That’s where we’re trying to play a role.”
Direct Access
Mobius’s standing within the industry (the veteran investor has been called a “pioneer of emerging market investing” and an “emerging market guru”) will be the key to opening companies’ doors and exerting influence on their management practices.
“We have unique and direct access to the management, the boards and the owners of the companies,” said Konieczny. “We don’t have to go through third parties or build large holding in the companies to facilitate a meeting or a discussion with key stakeholders.”
“Even with a relatively insignificant holding, having the owners and the boards that want to listen and want to deliver value to shareholders, it’s easy to change the mindset of the companies,” he continued. “Sometimes, it’s all about education on what can be done to make improvements.”
While Mobius is an expert on corporate governance, having served on World Bank’s Global Corporate Governance Forum, he will be supported in this area by Konieczny, who managed, on behalf of Franklin Templeton, Romania’s state investment fund Fondul Proprietatea, since 2011. “It involved a lot of work with [private] companies but also with the Romanian government,” noted Hardenberg.
