You have built a successful career investing in emerging economies. Can you describe how these economies have changed over the last 20 years?
Today’s emerging markets bear limited resemblance to the markets of decades ago. For one thing, the boom-busts of the 20th century have been replaced with more sophisticated central bank policies and diversified industry bases across many markets, including India. A growing consumer class has driven domestics and fuelled these markets, replacing the dependence on commodities that we saw two decades ago.
There have also been great strides in governance standards across both companies and sovereign systems within emerging markets. Today we observe much more promising and standardized approaches to governance structures, which enable these economies to participate in global economic flows. As a result of all this, today’s emerging markets are mainstream in every way except for one: in terms of broad asset allocations.
The time has come for this to change. The bulk of global GDP and GDP growth comes from these economies. Today, I see emerging markets in the ‘sweet spot’ of their development. These markets are highly investable, yet they remain inefficiently traded because asset allocations remain low. They represent a tremendous opportunity to generate alpha.
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