InvestmentsMay 13 2013

“One doesn’t want to be too reckless”

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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.