Will Emerging-Market Pioneer Mark Mobius Be Vindicated?

RIP Mark Mobius, an investment pioneer recently memorialized on Morningstar.com. I first heard of “the Indiana Jones of global investing” in the late 1990s. At the time, I was working for University of Chicago professor Marvin Zonis, who knew Mobius from their Ph.D. days at the Massachusetts Institute of Technology and shared his passion for the global political economy. It was Zonis who gave me Mobius’ book, Passport to Profits.

When I interviewed for a Morningstar mutual fund analyst position in 2004, Kunal Kapoor, now our CEO, asked who I admired as an investor, and I named Mobius. I talked about his globe-trotting, tire-kicking, buy-while-others-are-selling ways.

Fast forward to 2018. I was in Mumbai for a Morningstar India Investment Conference with Mobius as the keynote speaker. At the preconference breakfast at the Sahara Star Hotel, I encountered Kapoor and Mobius sitting together. Kapoor invited me to join, then promptly excused himself to “hop on a call.” Though I was jet-lagged and dribbling curry on my shirt, Mobius welcomed me graciously and was delighted to hear about my Zonis connection.

In his conference presentation, Mobius showed a series of then/now photos of emerging markets. “This is what Bombay looked like when I visited in the 1980s … This is Mumbai today.” Afterward, the Indian financial advisors lined up for selfies. Dr. Mobius’ enthusiasm for their market, dating from long before it was fashionable, was infectious.

Mobius’ passing got me thinking about the asset class he championed. There’s no doubt it hasn’t lived up to its promise. But could its future be brighter than its recent past?

Still Emerging After All These Years

The copy of Passport to Profits I found in the Morningstar library is well worn. Published in 1999, the book contained several dog ears and highlighted passages, reflecting years of analyst coverage of Templeton Developing Markets TEDMX and other funds Mobius managed.

On first reflection, the book’s subtitle, “Why the Next Investment Windfalls Will be Found Abroad—and How to Grab Your Share,” hasn’t aged well. In recent years, the best investments have largely been found in the US stock market. At the end of the first quarter of 2026, the two largest US public companies—Nvidia NVDA and Apple AAPL—were worth more than the entire constituent value of the Morningstar Emerging Markets Index ($12.3 trillion).

That said, there was a time when Mobius’ book looked prescient. From the start of the millennium, US equities suffered a lost decade. Meanwhile, Chinese economic growth and a commodities supercycle powered the “BRICS” markets (Brazil, Russia, India, China, and sometimes South Africa) to impressive, albeit stomach-churning, gains. The investment growth chart below supports the statement in Mobius’ preface: “[T]he greater potential for investment reward is invariably accompanied by higher degrees of risk.”

I’ve written before about the long “period of US exceptionalism and emerging-markets weakness” that started roughly in 2011. The era was defined by a strong US dollar and the rise of hyperscalers at the forefront of trends like mobile computing, social media, cloud computing, and artificial intelligence. Meanwhile, emerging markets suffered one setback after another. A collapse in commodity prices, Chinese government intervention, Latin-American political risk, and Russia’s invasion of Ukraine all detracted from returns. The Morningstar Emerging Markets Index posted an average annual gain of just 4.6% annualized for the 15 years through the end of 2025 in USD terms. That compares with a near 14% average annual gain for US equities.

Rereading Mobius’ book, emerging markets’ travails of recent years aren’t exactly new. Mobius writes of Hong Kong Stock Exchange closing for three days after the US stock market’s 1987 “Black Monday” crash, the Latin American “Tequila Effect,” and the “Asian Contagion” sparked by the devaluation of the Thai Baht in 1997. Still, the asset class performed well for the decade ending 1999, thanks to the tailwinds of globalization, deregulation, and privatization.

Evolution of an Asset Class

When Mobius launched his fund in 1987, investable emerging markets were limited to Hong Kong, Malaysia, the Philippines, Singapore, and Thailand. Sectors like financials, materials, and utilities dominated. Mobius’ book is full of stories about companies like Siam Cement, the Krasnoyarsk Aluminum Company of Siberia, and Brazilian utility Electrobras.

Today, the Morningstar Emerging Markets Index contains 3,783 companies from 22 countries. While Hong Kong and Singapore have graduated to developed-market status, China is now the largest single emerging market, at 25% of index weight. The technology sector has grown its share of emerging-market equities, while commodities-focused markets and companies have declined. Part of that is Russia’s removal from the global investment map.

Emerging markets benefited from their tech sector orientation in 2025, a year in which they outperformed their developed counterparts. Several of the largest companies in the index have ridden the global AI wave. A weakening US dollar, as a result of trade policies and debt/deficit fears, also helped the asset class last year.

But some will look at the index today and see an overly top-heavy, tech-heavy asset class. The top 10 companies consume more than one fourth of the universe, and the tech sector 30%. In those regards, the Morningstar Emerging Markets Index resembles the US stock market.

Valuation is one regard where emerging-market and US equities differ, however. At the index level, emerging-market equities traded at a 38% discount to the US on a price/earnings basis, as of the end of 2026’s first quarter. While that’s down from a 47% discount in 2024, it’s still a far cry from the 5% premium they commanded in 2007.

Will Mobius Yet Be Vindicated?

Having lived through multiple boom/bust cycles, Mobius understood the importance of valuation to investment returns. “The time of maximum pessimism is the best time to buy,” wrote Mobius, invoking a term associated with Sir John Templeton, the man who first hired him to run money. He saw busts as sowing the seeds for the next boom, writing, “Easy times make people go soft. Hard times get people going.” Today, many emerging markets have improved their fiscal positions, while developed markets like the US, Europe, and Japan are heavily indebted.

At 13% of global equity market value, emerging markets are underrepresented relative to their demographic and economic strength. Meanwhile, the US’ 61% equity market share is disproportionate to its 25% share of the global economy and 4% share of the world’s population. Living standards in the developing world continue to rise. Demographics in many countries are favorable. As market economies take hold, more well-managed local companies will deliver shareholder value.

The fact that there are already some world-class companies located in emerging markets raises legitimate questions about whether investors should allocate to them on a stand-alone basis, or as part of a broader international or global equities portfolio. Taiwan Semiconductor Manufacturing TSM, for example, competes globally—its headquarters location can be seen as inconsequential. Hold on, say others—Taiwan carries huge political risk, which is endemic to the asset class. Furthermore, institutions and shareholder protections tend to be weaker in emerging markets.

As for me, I came away from my reread of Mobius’ book rueful that emerging markets haven’t delivered on their promise yet hopeful for the future. I was encouraged by their performance in 2025 and happy to see many experts remain bullish on their prospects. I’m convinced they deserve a place in investors’ portfolios—whether through a highly diversified allocation or selective strategy like the ones Mobius managed.