The average American investor will own equities from stock exchanges in once unthinkable places such as China, India, Russia and Eastern Europe.
It's simply a matter of time before this theory turns to reality,
according to two veteran mutual fund managers. The overwhelming momentum of new economies and their huge populations, coupled with the desire of U.S. investors to diversify into faster-growing markets, will make it happen.
Until then, there are plenty of other emerging markets with powerful growth rates to keep you busy if you're willing to assume some risk.
"You simply must have faith in all the people around the world before you're willing to invest in higher-risk areas," J. Mark Mobius explained in a telephone interview from a restaurant in Jakarta, Indonesia. "There's a philosophical change as governments of the world seek to move to market economies, which will result in more stock exchanges and much faster growth."
Mobius, who has lived in the Far East since the early 1960s and runs the $930 million Templeton Developing Markets Trust, was dining with Indonesian executives following tours of three factories and a helicopter ride over thick forest. Eighty percent of his time is spent visiting companies, and he also has a team of young analysts over whom he says he "cracks the whip." This fund, started in the fall of 1991, is up 46 percent in total return over the last 12 months.
"Ever since the 1989 revolutions destroying socialist thought, there have actually been more investment opportunities in Latin America than in Eastern Europe or Russia, but we can generally expect to see many new areas of high growth," predicted Ralph Wanger as he leaned back on the blue sofa in his downtown Chicago office.
"The fact is, the United States is a mature industrial economy with 2 to 3 percent growth, so other parts of the world offer considerably greater growth potential, in some cases 6 to 10 percent."
Wanger, well-known for his success with the Acorn Fund, also manages the $741 million Acorn International Fund, which was started in the fall of 1992 and is up 40 percent in total return over the last 12 months. He refers to himself as the "generalissimo," doing little overseas travel himself but depending on research turned up by four globe-trotting analysts.
International investing is hot, with countless investment firms getting into the act as billions of dollars flow into overseas funds. However, proven portfolio managers such as the enthusiastic Mobius, who targets undervalued stocks, and the acerbic Wanger, who enjoys uncovering little-known firms, offer long-term track records rather than a sudden emphasis on what's fashionable.
"You must invest in emerging markets with at least a five-year time horizon, for you'll have losses along the way, even though a FTC patient investor really can't go wrong in the long run," advised Mobius, whose Templeton Developing Markets Trust fund was down about 10 percent last year, largely because of political turmoil that affected his holdings in Turkey.
Mobius' favorite investment areas for both this fund and his Templeton Emerging Markets closed-end fund include Brazil, Turkey, Indonesia and Greece. Individual stock favorites are Telebras (Telecommunicacoes Brasileiras S.A.), one of Brazil's largest suppliers of telecommunications services; PT Barito Pacific Timber, an Indonesian plywood and pulp firm whose methods keep environmental concerns in mind; and Cukurova Elektrik AS, Turkey's privatized hydroelectric power firm.
"As these countries 'come out of the swamp,' they realize they need a telephone system, electric power and, eventually, broadcasting and cable, all of which offer investment opportunities," noted Wanger. "Some countries need virtually everything."
Wanger has a large portion of his money in Aisa, including the Japanese markert despite the recent downturn there, Hong Kong and Malaysia.
Templeton Developing Markets Trust, based in St. Petersburg, Fla., requires a 5.75 percent load (initial sales charge) and a $100 minimum initial investment, while Acorn International in Chicago is a no-load fund with a $1,000 minimum initial investment.