“Rough seas, wild storms, harsh living and encounters with sharks” would be the subject matter of the closing address at portfolio institutional’s recent emerging markets conference, I learned as I perused the programme at the start of the day. As the event’s chairman, I made a mental note to make some jokey reference to that being a good metaphor for emerging markets when I introduced the speaker.
By the end of the day, however, my eyes had been opened – and not just by the impressively well thought out programme of speeches, debates and workshops put together by this parish’s editorial team. Apparently that is not a metaphor for how most institutional investors view emerging markets – it is actually how most institutional investors view emerging markets. Back in the retail world, where I spend 99% of my working life, emerging markets events certainly fl ag up the risks that are part and parcel of the asset class but they tend to point out the potential rewards too. The institutional world, however, would appear to have a hard time seeing past the fi rst part of that equation. So, for example, speaking at the Events-Hub Emerging Markets Focus I chaired last month, Jupiter Global Emerging Markets fund manager Kathryn Langridge observed: “Emerging markets are unloved and at the lower end of long-term valuations. Fund fl ows into the asset class are low because investors are currently more obsessed about what could go wrong than what could go right in the longer term. This all makes it an attractive entry point for investors.” Not all investors, it would seem. Back at the portfolio institutional event, we had a keynote speaker o_ ering us his fi ve key risks of i nvesting in China – entirely reasonably, they were the dominating role of the communist party, patchy corporate governance, economic stagnation, political collapse and an increase in East Asian tensions – and a debate between three economists, two of whom did not seem too keen on emerging markets and a third who was but preferred the outlook for the developed world. The conference started at 9.15am and the phrase “some excellent investment opportunities” just cropped up at 1.31pm. Of the potential dangers in emerging markets investing catalogued throughout the day, the one I would argue many institutional types have been guilty of falling foul of in the past – valuation risk – only made its fi rst appearance at 3.45pm. In my opening remarks, which seemed insanely bullish in the context of much of the day, I mentioned the idea – fl oated in my book – that the global fi nancial crisis, which very much had its roots in the Western fi nancial system, may have levelled the playing fi eld and closed the credibility gap between the emerging economies and those of the developed world. The book was published in 2009 so I freely admit I may have gone early on that but portfolio institutional assembled a lot of very clever speakers for its conference and nothing said during the day convinced me I will ultimately be proved wrong.
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