By Amanda Cantrell
With their burgeoning middle classes, comparatively high interest rates and strong growth forecasts, emerging markets should be attracting more attention — and money — from institutional investors. In the three stories that make up AR’s first-ever special report, we examine in depth the opportunities and challenges of investing in these markets.
As Jan Alexander writes in “Quest for Growth,” beginning on page 28, pension funds and other institutions have yet to invest in these markets in a meaningful way. That’s too bad, because with careful due diligence, investors can find some high-quality emerging-markets–based managers from which to choose. One is Hong Kong–based Value Partners. Allen T. Cheng’s profile of the firm, starting on page 34, reveals how co-founder Cheah Cheng Hye, a former crime reporter, uses his sleuthing skills to uncover undervalued stocks in the Asian equity markets. In the process, he has built a long-short equity firm that boasts a nearly 20-year track record and an annualized return since inception of more than 17 percent.
Emerging markets are not for everyone: They’re volatile, directional and high risk. But then, so are developed markets these days. So says Willem (Hans) Humes, another talented manager with a focus on emerging markets. Humes, the founder of New York–based Greylock Capital Management, has fashioned a career out of sovereign debt workouts in emerging markets. Recently, he found himself involved in the Greek restructuring, serving on the creditors committee. The situation had all the hallmarks of an emerging-markets workout. Indeed, as Michelle Celarier’s profile of Humes, starting on page 40, reveals, the manager thinks the lines between emerging markets and developed markets are getting blurred, and that the term “emerging markets” may well become obsolete. If Humes is right — he has an impressive history as a market prognosticator — investors may want to move quickly while there are still inefficiencies to be exploited.