The rise of emerging markets has changed the face of the investment industry. It would be difficult to argue now that a well-diversified portfolio should not include an allocation to emerging markets.
And while this is a relatively new theme for the retail investment industry, there are some that have built an entire career on specialising in the investment opportunities in emerging markets.
Charlemagne Capital’s co-chief investment officer Julian Mayo – although fund management wasn’t his first career choice – is one of those people, with a career in managing emerging market equities spanning 30 years, during which he admits the goalposts have moved significantly.
He notes: “The term emerging markets was coined in 1981 by a guy at the World Bank and I went to Hong Kong in 1983. The emerging markets then were really two city states and some Malaysian plantations.
“Thailand was then regarded as the next frontier market, Korea and Taiwan were closed to foreign investors, China didn’t have a stockmarket, India was closed to foreign investors, South America was a complete write off because of hyperinflation, South Africa had apartheid so you couldn’t invest there and Russia didn’t have a stockmarket.”
He adds: “It is very difficult to recognise nowadays that all of the four Brics were completely off bounds and a lot of what we invest in now and take for granted as mainstream markets, we didn’t invest in.”
Since then Hong Kong and Singapore have become developed markets and the emerging markets is now much more than just the four Brics, but Mr Mayo highlights the need to look to the future and what the next generation of markets could be.
“In the MSCI [emerging markets] index there are only three African countries that are even emerging markets – Egypt, Morocco and South Africa – everything else in Africa is actually frontier markets. But we invest in a number of those markets. We invest in Kenya, Botswana, Nigeria, Ghana and some of the mineral companies in places like Angola, and some of the other West African countries,” he notes.
“One doesn’t want to be too reckless in investing in things just because no-one else is investing in them, but on the other hand there are opportunities in a lot of markets that are not even recognised as emerging markets.”
He claims the same can be said of Asia where Bangladesh, Pakistan and Vietnam are among the largest countries in the world by population.
“Of the world’s 20 largest countries by population, only three of those are developed countries – US, Germany, Japan – and of the remaining 17 only ten are currently recognised as emerging markets.
“So seven of the top 20 countries by population are not even emerging countries and these are countries such as Nigeria, Vietnam, Bangladesh, Pakistan, Iran, Ethiopia, it’s a very eclectic mix.”
Mr Mayo adds: “We are invested in some of them already, and some of them we may never invest in. There is a very good chance we will be investing in most of those countries in the next five years, so one needs to keep most of your focus on the here and now but you also need to be focused a little bit on what is happening in the future.”
The manager’s decision at the start of his career in 1983 to focus on the under-researched area of emerging markets was, he admits, slightly left field, particularly given that he aspired to be a professional footballer for Arsenal.
For Mr Mayo, there was no family connection to the industry or to emerging markets and until he relocated to Hong Kong to work for Schroders, he knew very little about the potential of this area of the investment industry. He notes the move into emerging markets came from his first job out of university with Schroders, which had two positions available.
“One was in Zurich, because I speak German,” recalls Mr Mayo, “and the other was in Hong Kong. Of course as a 21 year old either is interesting because it is exciting and foreign but thinking in retrospect being a 21-year-old single something in Zurich has limited appeal,” he jokes.
“I made the right decision. I chose Hong Kong. I ended up being an emerging market fund manager as a result, almost, on a toss of a coin.”
While his initial plan was to stay in Asia for a couple of years, he spent eight years in Hong Kong at Schroders and Thornton Management (Asia) before returning to the UK as a director at Thornton Investment Management in 1991, alongside Richard Thornton.
“We were then bought out by Dresdner Bank so I stuck around under their ownership for some time before joining a company called Regent Pacific with several of the people I’d previously worked with at Thornton, including the chief executive Jayne Sutcliffe, who is now the CEO of Charlemagne Capital.”
It was his connection to Ms Sutcliffe that landed him a job at Charlemagne Capital when he returned to the UK in 2003.
He adds: “I thought it was a natural discussion for me to have with Jayne Sutcliffe, and she offered me a position [as investment director]. I’ve been here for almost 10 years and co-head of the investment team since 2009.”
Travel remains an important part of the manager’s job, and even though he estimates he has visited more than 60 countries, he does have a preference for Indonesia and Turkey.
“Travelling is quite an important part of what I do, last month I did a two week trip to Asia, and a few days in Turkey. The company visits are a very important part of what we do.
“We actually have extremely good corporate access here in London, its geographically convenient and better positioned in terms of timezones.
“But sometimes some of the companies don’t come here so we have to go see them. The team we have here is on the road a lot, we’ve had people in Nigeria, Vietnam as well as the more mainstream emerging markets.”
He argues that experience counts for a lot in this area as there are parallels between what is happening in countries such as Nigeria now and what occurred in Indonesia five years ago or Thailand 20 years ago.
“There is a progression in terms of the sort of things you want to be able to invest in, in an early stage market.
“You can use the past as a guide, and one of the things I try and encourage my team to think is, what lessons can you learn from one market about what might happen in another market?”
He adds: “You have to refresh your knowledge base because no two countries are exactly the same, but you need to be able to take those lessons and say what the similarities and differences are in the regulatory environment, in financials or in retail, for example.”
CV
2009-present: Co-chief investment officer at Charlemagne Capital (UK)
2003-09: Investment director at Charlemagne Capital (UK)
1999-2003: Managing director at Regent Pacific, Hong Kong
1996-99: Director at Regent Pacific (UK), London
1991-96: Director at Thornton Investment Management, London
1985-91: Fund manager at Thornton Management (Asia), Hong Kong and Tokyo
1983-85: Schroders, Hong Kong
