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. Last Updated: 07/27/2016

Mobius Planning New Fund

Mutual fund guru Mark Mobius said Monday he hopes to launch a second Russia-based fund in stocks and bonds aimed primarily at wealthy Russians and individual foreign investors.


Mobius, president of the Emerging Markets Fund for U.S. mutual fund giant Templeton, said the registration process for the new open-end domestic mutual fund is under way.


The fund, which will be managed by ZAO Templeton Management, has not received approval yet from Russian securities regulators.


Mobius told journalists in Moscow that fund's prospectus would initially list $10 million to $20 million in assets, but should grow to the level of some U.S. funds.


"If you compare the population of the U.S. versus Russia, the difference is not very big," he said. "Now Templeton is managing $160 billion [in the U.S.] and there's no reason we can't reach that level in Russia in future years."


He said, however, that it may take awhile to attract Russians in a country that has become skeptical of investment funds in the aftermath of pyramid schemes such as MMM fraud.


Mobius conceded that so far he has been able to invest only 75 percent of the money he raised for the closed-end Templeton Russia Fund Inc.


Some investors are wary of Russia because of uncertainty about the health of President Boris Yeltsin, who is due to have heart surgery soon, and the fate of reforms he has backed, but Mobius said other factors may be more significant.


"Uncertainty is often a good time to buy, but the real problem is liquidity," he said. "Even though it may be a good time to invest, the number of instruments on the equity side is quite limited."


Templeton funds can't invest more than 20 percent in any sector, he said, and "we reached the limit in each sector. We're trying to go deeper to find second- and third-tier companies. Risk gets greater as you move down into those companies, but we have no choice."


Mobius said the quest for lower-tier stocks would "start out with companies which will work with our custodian Chase Manhattan" and target sectors including consumer goods, machinery and shipping.


Currently, the Templeton fund holds shares in Rostelecom, LUKoil, United Energy Systems and "most other blue chips," Mobius said. "I would not say this market is very cheap, given all the risks and problems. But I wouldn't say that it's very expensive. It's reasonably priced at this stage."