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In Volume I of the Investment Institute Journal, we examined “The Great Reset” of global markets. Our thesis was that financial markets were due for a significant reset of expectations mainly due to impending changes in US monetary policy in the United States and a maturing, and slowing, Chinese economy.
In Volume II, the Journal focuses on one element of this reset: how investors should think about the long-term sustainability of growth in emerging markets. The Journal breaks this element down into its core components and looks at what “sustainability”, “growth” and “emerging markets” really mean in a changing global environment.
In Chapter I, we explore several new frameworks for defining and assessing emerging market economies. Our Multi-Asset investment team has developed a framework for assessing the “quality” of emerging market growth, which reinforces why they see the growth and development of emerging economies as an enduring theme and moves away from the conventional “quantum” approach of top line GDP. Our Chief Strategist, Michael Power, breaks with the tradition in favour of his new BLOCS methodology for grouping and analysing frontier and emerging market opportunities.
Lastly, one of the world’s leading economists and Director of Columbia’s Earth Institute, Professor Jeffrey Sachs, gives his views on the importance of sustainable development and the future of emerging markets.
In Chapter II, we consider why one of the keys to transforming growth into inclusive wealth generation and development lies in the capacity and effectiveness of government and its institutions. Professor Matt Andrews from Harvard University illustrates why the common approaches to governance, such as the World Bank Governance Indicator and Doing Business scores, can be misleading and proposes a new way of assessing state capacity. Louise Arbour, one of the most respected voices on matters of global peace and security, highlights why civil and political unrest has a direct impact on business and investment within a region. We, as investors, are increasingly conscious of the importance of environmental, social and governance issues. Our ESG team outline how they integrate these concepts into the everyday fabric of Investec Asset Management’s portfolio management, particularly when evaluating state-owned enterprises.
In light of the macro-economic and governance landscape, in Chapter III, we turn our attention to how best to access these growing asset classes and new investment opportunities. Our emerging market fixed income team discusses the five-year outlook for emerging market debt, an extremely topical discussion considering the macro-economic challenges that many emerging economies have been facing of late. Africa’s private markets are of increasing interest to global investors and our article on African private equity explores its inherent opportunities and challenges. Lastly, Nicky Newton-King, CEO of the Johannesburg Stock Exchange, provides us with a very insightful interview on the development of Africa’s capital markets.
We hope that our second Institute Journal offers some fresh and thought provoking ideas from leading experts and practitioners on the future of emerging market investing and we welcome your thoughts and comments to help shape our research going forward.
Katherine Tweedie is Executive Director of the Investment Institute at Investec Asset Management.Download PDF