Photo: Kommersant

Mark Mobius, chief executive of Templeton Emerging Markets Group, which has assets of about $39 billion, and a longtime supporter of investing in Russia, spoke about the problems of investors in the local market.

On Friday, July 17, the board of directors of Templeton Russia and East European Fund (TREEF) decided to liquidate and dissolve the fund, which specializes in investments in Russia, the countries of the former USSR and Eastern Europe. If the decision of the TREEF board of directors is approved at the shareholders meeting scheduled for September 24, 2015, the fund may be liquidated before the end of 2015.

Created by legendary investor Mark Mobius in 1995, TREEF may be liquidated 20 years after its creation due to declining asset size and falling investor interest, Franklin Templeton said in a statement. As of June 30, 2015, TREEF's total assets were estimated at $57.95 million. For comparison, as of September 30, 2014, the fund's assets were estimated at $75.47 million. The value of the fund's securities on the New York Stock Exchange over the past year has fallen almost by 32%, from $14.58 to $9.95. Over the past five years, TREEF securities have fallen in price by more than 60%.

The Franklin Templeton report also notes that sanctions imposed against Russia could cause another devaluation of the ruble, a downgrade of credit ratings of Russian issuers and a fall in the value of their securities. TREEF's managers are also considering a scenario in which the fund could be prohibited from investing in sanctioned companies, resulting in securities being frozen. “If the Russian government takes retaliatory measures, there is a risk of seizure of the fund’s assets,” says TREEF’s official press release. But, as Mobius told RBC, all this does not mean that Templeton is leaving Russia.

— Last week, Templeton decided to liquidate and dissolve a fund specializing in investments in Russia and the countries of the former USSR. Does this mean that you have changed your view on investing in Russia?

— No, my opinion about Russia has not changed. The country has recently experienced problems with corporate governance. We were concerned, for example, with the situation with STS, when the state passed a law stating that foreigners should not own more than 25% of the shares of media companies. Such changes always hit investor confidence, and I was a little disappointed by this too. But in the long term, I believe in Russia.

— When the board of directors decided to liquidate, did you oppose it?

- No, this is purely a business decision, the fund has become too small, it has stopped generating income. I don't see any point in keeping the fund small.

— Do you believe that there may be an expansion of sanctions that could hurt the interests of foreign investors in Russia?

- Maybe. But if the sanctions are softened or lifted, this will be a very positive moment for the Russian market. It is a positive sign that the US, Russia and Iran recently came together to discuss the Iran nuclear deal.

— Do you have any forecasts about how long the sanctions may remain in force?

- I would like to know, but, unfortunately, no one knows. A lot depends on American and European politicians and, of course, on the actions of Russia. We just hope they don't last too long.

— What is the likelihood that Templeton will return to Russia?

— Franklin Templeton is still investing in Russia, we have large investments in Russian companies, we closed only one fund, and did not exit all investments. I cannot disclose specific figures now, but we are talking about hundreds of millions of dollars.

— Which sectors of the economy do you think have the greatest potential?

— In the long term, these are, of course, raw materials industries, be it mining or oil production. In the short term, I would pay attention to companies in the consumer sector.

— Do you personally continue to invest in Russia? Not planning on getting out of your investments?

— Yes, I have investments in Russia, and I will keep them. We manage the funds ourselves, and I own shares in them. I can’t buy shares of individual companies myself, you need to get special permission to do this, and this is an extra headache, but I own shares in funds that invest in Russia.

— You are a rare example of an investor who still believes that investing in Russia is a good idea. What is this belief based on?

— The essence of the matter is that Russians are wonderful people with great opportunities. The country has enormous human and natural resources. For this reason alone, Russia will always be a good place for investment. The only problem is the lack of rules and regulations that would be friendly to investors, not only foreign but also local. It is necessary to make sure that forecasts can be made with confidence, so that businesses do not fear that the state will suddenly change some rules - this is something that the Russian government must keep in mind if it wants to attract investment. The rules must be very clear and understandable so that people can plan long-term investments in the country.

— How much money did you lose in Russia due to falling markets?

— It’s impossible to calculate exactly, we were always selling something, buying something. Sometimes we bought at the bottom and exited the investment with a profit. I don't think we lost a lot of money. Again, I can’t give any figure, but it’s unlikely that these are any significant amounts.

“The problem is the lack of rules”