Best Investment Themes in Emerging Markets: Franklin Templeton
- $ 1.5 trillion company Franklin Templeton just hosted a webcast on major global investing topics.
- Portfolio managers Alastair Reynolds and Pawel Wroblewski discussed their ideas.
- Reynolds leads the company’s emerging markets equities team and Wroblewski specializes in growth equities.
While US stocks have dominated global markets in recent years, investors are still fond of the idea of discovering a little-known foreign company that is ready to profit from a trend that is changing the world.
A group of portfolio managers from Franklin Templeton, which manages $ 1.5 trillion in wealth, discussed these trends and other ideas during a webcast on Wednesday.
An insider asked Alastair Reynolds, portfolio manager for the company and head of the emerging markets equities team at Martin Currie, and Pawel Wroblewski, portfolio manager in ClearBridge’s global growth team, where they see the best investment opportunities over the next five to ten years.
Wroblewski said he was excited to find some Artificial Intelligence winners. While self-driving cars have gained a lot of attention, he says that so far, self-driving vehicles have had more success in controlled areas like agriculture and mining. But he sees major implications for AI in drug discovery, preventive medicine, and transportation.
“We really love this space because every type of machine learning is improving exponentially,” he said. “With machine vision things get really interesting.”
One method that works for Wroblewski is to seek out companies that are already successful because they are able to make investments that lead to greater success. He notes that customer service is an area with a lot of room for growth, as industry leaders already find chatbots very useful.
How to play it: Exchange-traded funds are a way to gain diversified access to the topics covered by Wroblewski. The ETF ARK Autonomous Technology & Robotics and the ETF Global X Robotics & Artificial Intelligence include companies that reflect these themes.
Meanwhile, Reynolds noted that electrification is a big trend to watch, explaining that China and India are in the early stages of a multi-year greening process. “Electrification is really the right place for us in terms of the larger topic of decarbonization.”
Reynolds says companies in emerging markets will eventually manufacture the batteries and infrastructure that will go into greener transportation infrastructure in the developed world. For example, many of the rare earth metals needed for electrification and battery storage are mined in South America and other emerging markets.
Reynolds also says that the decomposition of globalization into regionalization will lead to a lot of investment in emerging markets and could also lead to higher inflation.
“It’s going to be good for the suppliers of capital goods, for building materials, for industrial property, for warehousing,” he said.
How to play it: Investors interested in these concepts could apply them with the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index and the iShares Emerging Markets Infrastructure ETF.
Wroblewski says some of the best opportunities in emerging markets sometimes “overtake” entire generations of technology, which can lead to explosive growth. He says this is usually driven by local companies instead of large multinationals.
For example, he says traditional banks haven’t achieved a large market share in Latin America, and now fintechs and mobile banking are taking off. And logistics companies in Eastern Europe are starting to experience great success as automated parcel sorting technology gains momentum and costs come down.
How to play: Two funds that include companies related to the topics covered by Wroblewski are the mobile payment ETF ETFMG Prime and the infrastructure-related S&P Kensho Intelligent Structures ETF SPDR.