Franklin Templeton emerging markets veteran Mark Mobius is looking to invest in Iraq in the next year, just as soon as he can persuade a custodian bank to set up there.

Speaking at a press briefing to mark the 20th anniversary of his UK investment trust, TEMIT, Mobius spoke of the next growth markets he was interested in for his frontier markets funds.

'In the frontier markets you have to look at Africa, and countries like Nigeria and Kenya.' he says. 'Also in the Middle East, countries like Iraq, Iran and Syria are all potential growth targets going forward, although it doesn’t seem plausible right now.

'Iran has lot of potential. We are also looking at Iraq, though we are not invested there now. We would have to convince a custodian bank to set up there though, and make sure the walls of the safe are thick enough... It could be six months to a year until that really comes together, and volumes would be small when it does.'

Among the frontier markets, he also likes places like Ukraine and Vietnam, partly because of the growing influence of domestic investors.

'These markets are small illiquid and are going through growing pains, but they will grow. Make no mistake about that,' he says.

In contrast to Roger Guy of Gartmore, who last week said he sees 'big problems' in Eastern Europe, Mobius is becoming more positive on the region.

'If there are no big shocks externally, then I think we will probably see a recovery in eastern Europe by the end of year, because most of their problems are already out in the open,' he says.

Mobius 'loves markets that are bombed out,' and so says he is looking to increase his exposure to Russia and the Baltics at the moment. However, after the rally that has seen the MSCI Emerging Markets index rise 60% since the end of February, Mobius thinks a minor correction could be just around the corner.

'I wouldn’t be surprised if there was an emerging markets correction,' he says. 'There must be lots of hedge funds shorting emerging at the moment. There has to be corrections on the way, that’s the nature of the beast. But a correction of 15-20% is nothing, especially with all those derivatives out there. But the long term trend will be up, there is no doubt in my mind about that.'

'Investors need to be ready for volatility, but also they should be confident markets will move up as the money flow increases, so we continue to be fully invested and confident that emerging markets will outperform developed markets.'

Mobius, who was one of the world's first fund managers to focus on emerging markets, admits that after more than 20 years of fund management, he has passed over most of his responsibilities to his team of portfolio managers and researchers, such as eastern European specialist Grzegorz Konieczny.

'I really don't run these funds any more,' Mobius said, describing his role now as 'badgering' his portfolio managers.