Guide To Investing in Emerging and Frontier Markets

Investing in Emerging and FrontierMarkets
Investing in Emerging and FrontierMarkets
Edited by
KamarJaffer
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Contents
Forewordxv
Prefacexvii
Emerging and frontier markets
xvii
Harnessing the potential of the middle class
xvii
Rising capitalisation and increased diversification
xviii
Emerging market debt
xix
A broader investor base
xix
Compelling valuations
xx
Risks in emerging and frontier markets
xx
Conclusionxxi
Acknowledgementsxxiii
About the editor
xxv
About the contributors
xxvii
1
The growing weight and influence of frontier markets

1
Dr Mark Mobius, Templeton Emerging Markets Group
Tomorrows emerging markets
1
A way to diversify
2
Long-term growth potential
2
Africa a continent of opportunity
3
Risks investors should consider
5
Liquidity and low market capitalisation
6
On-the-ground research
6
Accessing frontier markets
6
Conclusion7
The outlook for emerging and frontier markets

Charles Robertson, Renaissance Capital
The role of emerging markets sovereign wealth funds

17
Dr Eliot Kalter, E M Strategies Inc. and Dr Patrick Schena, The Fletcher School
Introduction17
Minding the institutional void
18
Surging SWFs in emerging economies and the paradox of outbound investment 22
The development agenda and the tensions of inward investment
32
Filling the void: reflections on a way forward
34
The importance of micro, small and medium enterprises in emerging markets

Khaleel Ahmed, IFC
The importance of small and medium enterprises
38
38
Contents
Definitions38
Composition of the industry
40
The missing middle
41
Issues and challenges facing the SME sector in emerging markets
41
The SME finance gap
42
Non-financial barriers
45
Weaknesses in credit delivery and support by financial institutions
45
Policy interventions designed to expand SME finance
46
The World Bank Group/IFC
47
IFI engagement with SMEs
48
Annex 4.1
50
First mover advantage: Bank Muscat targeted Omans unbanked SME market 50
Serving the female-headed SME segment: Access Bank Plc Nigeria
50
ICICI Bank
51
5
The regionalisation of emerging debt and equity capital markets

53
Julian Perlmutter and Piers Summerfield, Simmons & Simmons LLP
Recent developments and emerging trends in the dim sum bond market
53
Steady growth of the young dim sum bond market
53
Overview of the current dim sum bond market certain distinctive features 54
The maturity profile of dim sum bond issuances
54
The geographical diversification of dim sum bond issuers and investors
55
More rated dim sum bond issuances
56
Dim sum bond market trends in 2013 and beyond
56
Recent developments and emerging trends in Middle Eastern debt capitalmarkets 57
Recent developments and emerging trends in Kenyan debt capital markets
61
Recent developments and emerging trends in the Nigerian debt and
equitymarkets
63
Conclusion65
Risks and return expectations for emerging and frontier markets

66
Allan Conway, Schroders
Historic performance
66
Near-term prospects
67
Long-term outlook
72
Risks76
Portfolio allocation, diversification and risks across emerging and frontier markets 78
Matthew Annenberg and Robin Anderson, Principal Global Investors
Motivation78
Diversification benefits and risks to frontier market investing
79
Benchmarks83
Portfolio89
Conclusion92
vi
Contents
Looking beyond external emerging market debt

Michael Gomez, PIMCO
Local debt will continue to stand out
Investment implications
Exchange-traded funds and the opening up of emerging markets
Manooj Mistry, Deutsche Bank
The general benefits of accessing emerging markets via ETFs
The challenges of creating ETFs on emerging markets indices
ETF product structures
Size, scope and turnover of the market
Frontier market ETFs
Active asset allocation to emerging markets using ETFs
95
98
100
101
101
102
102
103
106
106
10
Market regulation and supervision in emerging and frontier markets

107
Kai-Niklas Schneider, Clifford Chance LLP and Leen Qablawi, Latham & Watkins LLP
Introduction107
107
Regulatory approaches
108
Basic principles
109
Regulation in emerging and frontier markets
109
Which approach works best?
111
Principles versus rules-based approach
111
One-size-fits-all approach
111
Conclusion112
11
Growing power of emerging market titans

Sohail Jaffer, FWU Group
Role reversal in emerging market foreign direct investment flows
The growing importance of emerging market-based transnational corporations
Go out
Private equity and sovereign wealth fund drivers of FDI
Outlook for increased south-south investment flows
Commodity security as a driver of FDI
Risks impacting FDI flows
The risk of resource nationalisation
Security concerns: real or imagined?
12
Private equity in growth markets: changing patterns, emerging trends

Sarah Alexander, The Abraaj Group
Lessons from the first generation
A fundamental and lasting shift
Global growth markets opportunity
Private equity access to the growth economy
114
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114
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118
119
120
121
121
124
125
125
125
126
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Contents
Institutional investor goals

Industry maturation delivering returns
Local support and participation
A long runway
Looking ahead market and fund-size diversification
126
127
128
129
129
13
Doing valuations in emerging markets

130
Pr-Ola Hansson, Ernst & Young
The preferred approach to emerging-market valuation
130
Why the DCF model is preferable for emerging markets
131
Consistency and building in advantages
133
Limits of the guideline companies/multiples approach
133
The bridge: justifying paying a premium
135
Summary135
14
Family businesses in emerging markets

136
Antonios Koutsoukis, Credit Suisse
Advantages of family businesses
136
Growing the family business
137
Governance risks in family businesses
138
Adapting to change
141
Bibliography142
15
Growth of Islamic finance in emerging and frontier markets

143
Baljeet Kaur Grewel, Kuwait Finance House
Introduction143
Global Islamic finance industry
146
Islamic finance industry: products and services
147
Islamic finance: key development in emerging markets
148
GCC148
Saudi Arabia
149
Oman149
Kuwait149
Qatar149
Turkey150
Asia150
Indonesia150
Malaysia151
Africa151
Nigeria151
South Africa
152
Sudan152
Islamic Development Banks role in promoting Islamic finance and SMEs
152
Outlook and potential for Islamic finance
153
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Contents
16
Verging on emerging: the reasons for surging investor interest in global

frontiermarkets asset management
155
David Wickham, HSBC Global Asset Management
Commencement155
Classifications: what are frontier markets?
156
Characteristics of global frontier markets: the 7Cs
158
Comprehensive universe
158
Change161
Consumers163
Commodity wealth
165
Correlations166
Cash returns
168
Cheap valuations
169
Considerations: navigating the risks of global frontier markets
170
Political risks
170
Commodity risks
171
Liquidity risks
171
Sector risks
171
Currency risks
172
Capital allocations to frontier markets
173
Conclusion174
17
Alternative investment landscape in emerging and frontier markets

177
Ian Morley, Wentworth Hall Consultancy
Introduction177
Substantial growth in emerging and frontier markets
178
Emerging markets hedge fund performance by geographical area
179
Type of strategies
181
Challenges facing emerging and frontier markets
182
18
Wealth management in emerging and frontier markets

Justin Ong and Darja Habarova, PricewaterhouseCoopers LLP
Asia the new diamond in the wealth frontier
Asias growing financial centres for wealth management
Emergence of the Asian regional players
Investment preferences in wealth management in Asia
Preserving wealth long-term in Asia
The talent conundrum
A bright future, or a sunset industry?
184
Insurance in emerging markets

Richard Holloway and Sanket Kawatkar, Milliman
The importance of life insurance in emerging markets
Review of some of the emerging markets in Asia
193
19
184
185
186
188
190
191
192
193
193
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Contents
Insurance markets in India and Indonesia

196
India198
Indonesia199
Future outlook and conclusions
200
20
Project finance in Asian emerging and frontier markets

Michael Barrow, Asian Development Bank
Good, bad and it depends
Filling the gaps
Broadening the funding sources
Creating bankable projects
In short
202
202
203
205
206
206
21
Infrastructure funds in emerging and frontier markets

207
Frank Kwok, Steve Gross and Melanie Gilmore, Macquarie Infrastructure
and Real Assets
Introduction the emerging market opportunity
207
Challenges and characteristics of investing in emerging marketsinfrastructure 208
Long-term planning
209
Regulatory risks
209
Track record
209
Environmental and social concerns
210
Lack of resources and experience
210
Investing in emerging markets infrastructure
210
Role of development banks and other multilateral institutions
210
Investing through an infrastructure fund
211
Characteristics and returns of unlisted emerging markets infrastructure funds 213
Conclusions214
Case study: Philippines Investment Alliance for Infrastructure
215
22
Oil and gas in emerging and frontier markets

Meb Somani, Lakhbir Sandhu, and Andrew Grant, Barclays Natural
ResourceInvestments
Opportunities in emerging markets for oil and gas investors
What is an emerging market, from an oil and gas perspective?
The challenges of oil and gas investment in emerging markets
Managing oil and gas investment in emerging markets
216
Renewable energy in emerging markets

Yesim Bezen and Onur Oksan, Bezen & Partners and Claire Wilby
Introduction: renewable energy and sustainable solutions on the global agenda
Building sustainable energy strategies
Political support
Investment and financial incentives
221
23
216
217
218
219
221
221
222
222
Contents
Regulatory and legislative framework

223
Potential of the green industry
223
Use of natural resources
223
Case study: Turkey
224
First steps: the legislative framework
224
Second steps: adapting the legislative framework
224
Next steps: recognition of market reaction
225
Adding a new element to get the right energy mix for Turkey: solar energy 227
Conclusion227
24
Telecom tower transactions in emerging markets

229
Federico Membrillera, Victor Sunyer and Kamal Daswani, Delta Partners
Recent trends impacting operators appetite for tower transactions
229
Recent trends in tower investment in emerging markets
230
Opportunities for tower management companies
233
Opportunities for financial investors
234
Innovative tower sharing models in emerging markets
235
Key challenges in tower transactions in emerging markets
236
Conclusions238
25
Spotlight on China
239
BOCI-Prudential Asset Management Ltd
Introduction239
The rise of the onshore equity market in China
239
Move towards a multi-tier stock market
241
Into stock futures and derivatives
243
The IPO market and fund industry
244
Opening domestic equity market to foreign investors: QFII and RQFII
246
Complementary development of fixed income market
247
The development of offshore equity market
248
Conclusion251
26
Spotlight on Indonesia
Douglas Clark Johnson, Codexa Capital
Indonesia: high-fashion for a reason
Story distinguished by domestic demand
Macro analysis: the good news and thebad
Islamic finance: fresh perspective on reform
Investment outlook: across the board potential
27
252
252
253
254
255
256
Spotlight on India
260
Karuna Luthar, Elara Capital
Introduction260
Young and able workforce
261
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Contents
Huge potential for consumption

261
Women: an opportunity in waiting
262
Savings: help or hindrance
262
Poverty262
Literacy rates
263
Resources264
Infrastructure264
Transparency and governance
265
Policies: reduction in subsidy bill
265
External factors
266
Comparative yields and growth data
266
Conclusion267
28
Spotlight on Latin America: opportunities and challenges in Brazil and Mexico 268
Gray Newman, Morgan Stanley
Brazil: infrastructure prospects
268
Mexicos moment
271
Conclusion274
29
Spotlight on Turkey: searching for the correct growth model on the road
to 2023
275
Ertunc Tumen, Ak Asset Management
Turkey gave a striking economic performance between 2002 and 2012
275
High hopes for 2023
275
But which model to follow?
275
Following the BRIC model?
276
Is the South Korean model a more realistic one to follow?
276
An economic growth model in Europe?
277
Could Turkey create an economic growth model of its own?
277
A stable economic background and the financing of innovative investments
278
Global science and technology leadership to be required in certain areas
278
Techno parks: a right step, but more progress required
278
Rise of the Anatolian tigers the dawn of a new entrepreneurial spirit
278
Other challenges
279
Conclusion279
30
Spotlight on Iraq: the worlds fastest growing major economy

Bartle Bull and Zaab Sethna, Northern Gulf Partners LLC
Exceptional political and macro-economic environment
Foreign investment
The Iraq Stock Exchange
Private equity opportunities in Iraq
Case study
xii
280
281
282
284
285
285
Contents
31
Spotlight on Africa: which growth for subSaharan Africa? Tapping its huge
agricultural potential is key
Claire Schaffnit-Chatterjee and Maria Laura Lanzeni, Deutsche Bank
A growing and increasingly diversified market
Social development remains low
Agriculture growth lags behind
Agriculture is key to growth, poverty and hunger reduction
Boosting agricultural yields inclusively
Broader, more sustainable input use
Closing the infrastructure gap
Technology development and technology transfer
Improving access to credit and insurance markets
Many wins associated with agricultural growth
287
287
288
288
289
289
290
291
291
291
292
xiii
Foreword
The concept of emerging markets originated in the late 1980s when multilateral institutions
interested in promoting the economic development of the worlds poorer countries realised
that the best path to development was through private enterprise investment. They had to
find a way to encourage investment in those countries by the enormous pools of pension
funds and other institutional money in the developed parts of the world. Until then, the idea
of investing in the third world, the south or the underdeveloped countries was unpopular
and considered very risky.
In 1987, we started the very first listed emerging markets fund, raising US$100 million.
It seemed like an awful lot of money at that time since there were only five emerging market
countries in which we could invest. I recently received a letter from one of our company
directors at that time. He reminded me that during the road show for the fund, the underwriters wanted to increase the amount to US$150 million but I refused since I thought it
would be too difficult to invest such a large sum of money. How times have changed!
This book explores the many aspects of emerging markets investment that have developed over the years and is a reflection of the tremendous opportunities that have appeared.
The authors are experts in emerging markets, and provide wide-ranging insights into these
opportunities. In my contribution (Chapter 1) I discuss the growing weight and influence of
frontier markets which are a subset of emerging markets and display many of the characteristics that emerging markets did when we were starting out in 1987. Fund flows into emerging
and now frontier markets have risen exponentially since the 1980s and the mechanisms of
those flows and how they have affected the market is explored here.
Another section of the book deals with the outlook for emerging and frontier markets
and relates the growth of markets around the world to the levels of debt, currency values
as well as other variables. The role of sovereign wealth funds is covered in an interesting
chapter on the nature of such funds, their asset allocation practices and how those practices
impact emerging markets. Small and medium enterprises and their importance in emerging
markets is a topic which is particularly timely, since more and more small and mediumsized companies are being listed in emerging market stock markets around the world. The
performance of these companies has often been quite outstanding.
Further topics covered in the ensuing sections include the regionalisation of both bond
and equity markets in the emerging market world; risk and return expectations for emerging
and frontier markets both near-term and long-term; portfolio allocation and diversification
requirements; the dramatic rise of emerging market debt issuance; and market regulation
and supervision in emerging and frontier markets.
Although portfolio investment in emerging and frontier markets is most visible, equally
important, if not more so given its impact, is the growth of private equity in emerging
markets and one section explores the changing patterns in that area. Related to that is a
chapter on the important role of family businesses in emerging markets, and their advantages
and disadvantages. Also discussed are the patterns of project finance including infrastructure,
energy (including sustainable energy), and oil and gas projects.
xv
Foreword
Selecting the right investment is the big challenge in emerging markets. The need for
doing comprehensive research and valuations is thus always present and Chapter 13 looks
at the methodology of that complex task.
The impact of religion is now being felt in emerging markets in terms of a growing
demand by investors for socially and morally acceptable investments. This is manifested in
the rise of Islamic finance in emerging markets and development of Shariah-compliant equity
and bond funds.
While equity and fixed income instruments are stars in the emerging and frontier market
firmament, the important role of insurance must not be overlooked, particularly since more
and more insurance products are based on equity and bond funds.
Finally, this book contains a number of case and country studies which enable the
reader to obtain a good insight into some of the more interesting aspects of emerging market
investing. Included are studies of Turkey, China, India, Mexico, Brazil and the frontier
markets of Iraq and the countries of sub-Saharan Africa.
This is a comprehensive volume covering a wide range of emerging and frontier market
topics that should be of interest to any inquiring investor.
Dr MarkMobius
ExecutiveChairman,
Templeton Emerging MarketsGroup
May2013
xvi
Preface
At a time of faltering recovery throughout the developed world, emerging markets continue to
provide investors with exposure to rapid economic growth. In its most recent World Economic
Outlook, the International Monetary Fund (IMF) forecasts that while growth in the developed
world will be a sluggish 1.2% in 2013, in emerging markets it will expand by 5.3%. Among
the largest emerging economies, the IMF expects China to lead the way, growing by a forecast
8% in 2013, followed by India (5.7%), Russia (3.4%), Mexico (3.4%) and Brazil (3%).
Africa, for so long dismissed by portfolio and direct investors due to poverty, poor corporate governance and political risk, is also emerging as one of the most dynamic economic
regions in the world. In 2012, a quarter of African economies grew by 7% or more, while
between 2013 and 2015 the region as a whole is expected to grow by an annual average of
more than 5%.1 In fact, the IMF has projected that from 2011 to 2015, seven of the top 10
fastest growing economies will be in sub-Saharan Africa (Ethiopia, Mozambique, Tanzania,
Democratic Republic of the Congo, Ghana, Zambia and Nigeria).2
According to the IMF, the share of global GDP coming from the emerging markets will
surpass that of the developed markets by 2015 and frontier markets are not far behind.
Harnessing the potential of the middle class

Economic growth data in isolation, however, only tells part of the compelling emerging market
story. Emerging and frontier markets are fragmented: they consist of diverse economies, people
and languages. Certain countries are commodity producers (for example, oil, gas, minerals
and precious stones), whilst others are major consumers. An OECD paper published in
January 2010,3 notes that in the 40 year period between 1965 and 2004, the G7 accounted
for 65% of global GDP. Underpinning this performance, and indeed driving the worlds
economy over this period, says the paper, was a large middle class.
At the time of writing, with economies in the developed world deleveraging, and with
unemployment levels persistently high, the consumerism that has led global economic expansion for at least four decades may be passing from developed to emerging and frontier
regions. In some of these regions, the process of so-called consumerisation, spurred on in
many cases by a parallel process of urbanisation, is coming from an exceptionally lowbase.
Asia is poised to take up the baton from the US and Europe as the driving force of
global consumerism. An analysis published by the Asian Development Bank (ADB) in 20104
forecast that assuming consumption expenditures continue to grow at roughly the same
rate as in the past 20 years, they are likely to reach US$32 trillion [compared with US$4.3
trillion in 2008] and comprise about 43% of worldwide consumption by 2030. This, says
the same study, will mean that Asias middle class replaces its counterpart in the US and
Europe as the worlds leading consumers.
Africa, in the long term, is expected to be one of the most populated and youngest and
fastest urbanising markets in the world. Its population is estimated at one billion today,
xvii
Preface
and by 2050, it is expected to reach two billion and overtake India (1.4 billion) and China
(1.6 billion).5 Because this population is relatively young, the continent has an estimated
working-age population of more than 500 million people that is predicted to more than
double by 2040.6 The fast-growing population has a growing middle class with combined
consumer spending power approaching US$1 trillion.
This growth of the middle class is of critical importance for equity investors, because
the process of consumer-driven private sector growth will accelerate in many emerging and
frontier countries at a much faster rate than GDP growth. In other words, headline figures
on emerging and frontier markets growth often understate the opportunities these countries
offer to investors.
Rising capitalisation and increased diversification

For equity investors in emerging and frontier markets, however, another essential piece of the
jigsaw that has only recently dropped into place is the existence of a broad, well-diversified
range of markets that are appropriately regulated and sufficiently liquid to absorb robust
inflows of international funds.
According to Ernst & Young,7 total market capitalisation of the worlds emerging equity
markets rose from under US$2 trillion in 1995 to US$5 trillion in 2005 and about US$13
trillion by the end of 2011. Over the same period, the total market capitalisation of developed
markets has only doubled. This process of convergence between the size of developed and
emerging markets is expected to continue over the next two decades. According to Ernst &
Youngs calculations, even if emerging market capitalisation only grows in line with GDP,
it could account for half of the global total by as early as 2020.
This growth will dovetail with diversification. Although the capitalisation of the emerging
market universe continues to be dominated by the so-called BRICS (the grouping of Brazil,
Russia, India and China, to which South Africa has recently been added), investors are
increasingly casting their nets further afield in search of opportunities elsewhere.
It has now become fashionable to look at the potential of the emerging market universe
through the lens of the so-called Next-118 set of Bangladesh, Egypt, Indonesia, Iran,
South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam. Although
the 11 countries within this group are very different, culturally as well as economically,
they share a number of characteristics underpinning their appeal to emerging market
markets. These include a higher long-term growth rate than their G7 counterparties, a
large, growing, young and aspirant population, and an evolving middle class enjoying
greater purchasing power.
More broadly, the universe of investable emerging markets has expanded at a breathtaking rate over the last years. When the Morgan Stanley Capital International (MSCI) global
emerging market index was launched in 1988, it included just 10 markets. At the time of
writing, there are 23 countries in the MSCI Emerging Market Index.
In contrast, the concept of frontier markets was coined in the 1990s. There is no single
definition of frontier markets, although these are described as pre-emerging markets being
less developed than emerging markets9 in which equity markets are investable but do not
have the market capitalisation, liquidity and other characteristics of emerging markets. The
xviii
Preface
MSCI Frontier Markets Index comprises 35 countries located in Central and Eastern Europe,
Africa, Middle East, Asia and South America in the Frontier Markets benchmark.
Emerging and frontier markets are fluid concepts as, given the rapid economic growth,
certain emerging markets are likely to be reclassified as developed markets and certain frontier
markets will likely transition into the next generation of emerging markets. For example,
the MSCI is reclassifying Qatar and the UAE as emerging market effective November 2014.
Although the liquidity of many of these markets remains limited, many of the smaller
frontier markets are registering rapid expansion, underpinned by market reforms as well
as vibrant economic fundamentals. Tiny Mongolia, for example, which has a market capitalisation of just US$1.3 billion, could reportedly see the value of its stock market explode
a staggering 30-fold, to US$40 billion, within five years, if a revision to the securities law
permits dual listings on its stock exchange.10 This would allow overseas firms such as those
that are investing in Mongolias plentiful mineral resources to list their shares in UlanBator.
Emerging market debt

Emerging market debt has also undergone a metamorphosis since the late 1980s, when
Brady bonds were designed as a way of repackaging bank loans into tradable debt. Today,
external emerging market debt is a US$700 billion asset class, more than three times larger
than in 1995, according to figures published by Ashmore.11 Based on the average growth of
the asset class over the last decade of 6%, Ashmore estimates that external debt will grow
to US$1.1 trillion by 2020.
Similarly to its equity counterpart, the market for emerging market debt is now highly
diverse. In 2012, the number of index-eligible emerging market sovereigns rose to 55,
compared with just 14 in 1993.12 Voracious investor demand for new emerging market
sovereigns will underpin a continued expansion of this universe. One of the most striking
recent indications of the strength of fixed income investor demand for new credits in the
emerging market space came in April 2013, when Rwanda launched its debut bond in the
international capital market. The order book for this 10-year US$400 million bond reached
US$3.5 billion, which is more than half of Rwandas GDP of US$6.9 billion. With governments in African countries ranging from Nigeria to Zambia having also taken their bow
recently in the international bond market, an increasingly diverse and liquid sub-sector of
the global fixed income universe is taking shape in a continent long regarded as the last
frontier for debt investors.
Until recently, liquidity considerations meant that most international investors in emerging
market bonds confined themselves to sovereign debt. Emerging market corporate debt,
however, is now one of the fastest growing asset classes. At US$1.3 trillion, it is now larger
than the emerging market sovereign and the European high yield bond markets combined,
and is growing by between US$200 billion and US$300 billion a year.13
A broader investor base

Critically, emerging market equity and debt are also no longer the preserve of specialist
fund managers, mutual funds and ETFs. Both asset classes are also increasingly drawing
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Preface
the attention of many of the worlds largest and historically most conservative investors,
such as sovereign wealth funds, which now have some US$2.2 trillion of assets. Take, for
example, the shifting asset allocation policy of Norways colossal sovereign wealth fund,
which is the worlds largest, with assets of close to US$750 billion. The Norwegian fund
was reported in April 2013 to have continued to move assets away from mature markets in
Europe and into equities in countries such as Kuwait and Oman, and debt in Latin American
economies including Colombia and Mexico. We see an increase in emerging markets and
their currencies to a significant degree over the next 10 years, the Funds CEO, Yngve
Slyngstad, told reporters.14
Compelling valuations
Even though many of the worlds emerging and frontier equity markets have underperformed
the US equity market since the end of 2009, it is easy to see why these markets remain
attractive to investors on a fundamental basis. Schroders15 advised at the end of 2012
that GEMs [global emerging markets] look extremely attractive in terms of valuations,
both absolute and relative to history, as well as on a market capitalisation to GDP basis.
According to Schroders, as of December 2012 emerging market equities sold on a very
undemanding forward price/earnings ratio of 10, compared with a historic multiple
of 12.
Risks in emerging and frontier markets

The under-development of markets and financial services, together with the lack of an
equity culture in many emerging and frontier economies, generates opportunities for
international investors but it can also create pitfalls. For example, while under-researched
companies clearly provide opportunities for international investors with extensive research
capabilities, governance standards can also fall well below those expected by fund managers
in developed markets.
Another potential pitfall is that it is a fallacy to assume that there is always a correlation between economic growth and asset price performance. For example, over the 19 years
between 1992 and 2011, the Chinese economy grew by an annual average of more than
10%. An investor in an equity fund tracking the MSCI China index over the same period,
however, would have achieved a negative return.16
There are several reasons why emerging market indices can often perform poorly relative
to economic growth rates. Foremost among these are that indices seldom mirror a countrys
economic structure. In Russia, for example, consumer and banking stocks still account for
less than 30% of the index. The balance is dominated by energy and commodity-related
stocks, many of which remain at least partially in state ownership, and are not accurate
proxies for the Russian economy.
Shortcomings such as these will progressively be eliminated as an equity culture crystallises
in a wide range of emerging markets, encouraging more family-owned and other privately
held companies to open their share capital to the investing public. This is turn will support
the continued growth and diversification of this vibrant asset class.
xx
Preface
Conclusion
Although setbacks and bouts of intense volatility along the way are inevitable, the long term
prospects for emerging market and frontier market activity remain bright. As Ashmore noted
in April 2013,17 valuations are low, earnings growth is strong and, relative to history and
to the rest of the world, the economic backdrop is stable if not getting stronger the time
for allocating is now.
This preface has no regard to the specific investment objectives, financial situation or particular needs of any specific
reader. The preface is published solely for informational purposes and is not to be construed as a solicitation or
an offer to buy or sell any emerging and frontier markets, specific sectors, strategies, securities or related financial
instruments. The type of transactions described herein for illustrative purposes may not be eligible for sale in all
jurisdictions or to certain categories of investors.
The contents of this preface is based on information obtained from sources believed to be reliable but is
not guaranteed as being accurate, nor is it a complete statement or summary of the sectors, strategies, securities,
markets or developments referred in the preface. The contents of this preface should not be regarded by readers
as a substitute for the exercise of their own judgement. The author accepts no liability whatsoever for any loss or
damage of any kind arising out of the use of all or any part of this preface.
World Bank, Africas pulse, press release, 15 April 2013.
www.economist.com/blogs/dailychart/2011/01/daily_chart.
3
OECD Development Centre, The emerging middle class in developing countries, Working Paper No 285,
January 2010.
4
ADB, Key indicators in Asia and the Pacific, 2010, www.adb.org.
5
MEED, Can Africa become the next China, 2013.
6
Fidelity.
7
Ernst & Young, Moving towards the mainstream: stock market developments and performance in the rapidgrowth markets, 2012, www.ey.com.
8
For more details, see www.next11.se.
9
JPMorgan.
10
See, for example, www.reuters.com, 18 April 2013.
11
Ashmore, The emerging view: price and prejudice, March 2013.
12
Ashmore, The emerging view, March 2013.
13
Insight Investment, The outlook for liquidity in emerging market corporate debt, Outlook 2013.
14
Bloomberg, 26 April 2013.
15
Schroders, Outlook, December 2012.
16
Schroders, Investing in emerging markets: a primer for UK pension funds, October 2012.
17
Ashmore, The emerging view, April 2013.
1
2
xxi
Acknowledgements
I wish to thank each of the authors for their valuable contribution, time, support and
dedication. Their wealth of knowledge and expertise is truly impressive and I am very grateful
to them for sharing it with us.
Our special thanks to Dr Mark Mobius, Executive Chairman of Templeton Emerging
Markets Group, for providing us with the foreword to the book.
I wish to express my appreciation to Melissa Oshungbure, Sarah Abel and Lanh Te
at Euromoney for their excellent co-operation, review and assistance and Tushar Garg
(Goldman Sachs Asset Management, Bangalore) and Shahzad Waraich (HSBC Global Asset
Management, Dubai) for their introductions and unwavering support in realising this unique
and important publication.
I wish to thank Sohail Jaffer, Partner, FWU Group, for his valuable inspiration and
unfailing support in enhancing the overall quality of this publication.
I am also grateful to my husband, Thomas Kristensen, for his understanding and patience
in supporting my efforts to realise this project.
xxiii
About the editor

Kamar Jaffer is a VP, Legal & Compliance at PineBridge Investments Middle East in Manama,
Bahrain.
She will be involved in advising on the distribution of financial products and services
and privately negotiated principal investment transactions in the Middle East and North
Africa (including Turkey).
Before joining PineBridge Investments Middle East, Kamar Jaffer was a senior associate
at Vinson & Elkins in Dubai and, prior to that, an associate at Allen & Overy in Dubai
and Clifford Chance in London.
Kamar Jaffer has a degree in English law from Kings College, London and a degree in
French law from the Sorbonne, Paris.
Kamar Jaffer has contributed a number of articles and co-edited publications including
Investing in the Middle East and North Africa (MENA) Region: Fast Track Opportunities
for Growth also published by Euromoney.
xxv

KhaleelAhmed
Khaleel Ahmed is Chief Investment Officer in IFCs Global Financial Markets Department.
He has worked with IFC since 1990 and has led IFCs investment transactions in banks
and financial intermediaries in emerging markets. He has significant transaction and advisory
experience spanning all different geographic regions and financial sector sub-segments, including
establishing new private financial institutions, and restructurings. His work experience with
IFC has also involved advising governments and regulatory authorities on financial market
development and regulation.
Prior to joining IFC, Khaleel started and headed the merchant banking operations of
National Development Finance Corporation of Pakistan (then the leading long-term financing
institution in Pakistan). Prior to that, he worked with Price Waterhouse in London to qualify
as a Chartered Accountant and later worked with their financial services consulting side.
Khaleel read Economics at the London School of Economics. He is a Pakistani citizen and
lives in Washington DC.
SarahAlexander
Sarah Alexander is a Managing Director with The Abraaj Group, a global private equity
company investing in the growth markets of Asia, Africa, Latin America, the Middle East/
North Africa and Turkey.
Prior to joining The Abraaj Group, Ms. Alexander was instrumental in creating the
Emerging Markets Private Equity Association (EMPEA), the leading provider of authoritative information and insight into the opportunities in the private equity industry in emerging
and growth economies. As Founding President and CEO, she grew the organisation to more
than 300 member firms representing 60 countries and more than US$1 trillion in assets
under management, while developing the industrys leading research products andprograms.
An industry expert, she is a frequent contributor and commentator for broadcast and
other media.
Previously, she was a private equity investor in Asia, and worked with the World Bank
Group, the US Department of State and the US House of Representatives. She received an
MBA from Harvard Business School, a Masters of Public Administration from Princeton
University, and a BA, summa cum laude, from Emory University.
RobinAnderson
Robin Anderson is an Economist at Principal Global Investors. She works with the Economic
Committee and the Chief Global Economist, Bob Baur, on weekly commentaries and
macroeconomic strategy. Robin also works with Multi-Asset Advisors, an investment boutique
within Principal Global Investors. Robin joined the firm in 2011. Prior to her current role,
Robin served as an Economist at the US Census Bureau. She received her PhD in Economics
from the University of Washington and a bachelors degree in Economics from the University
of North Carolina at Chapel Hill.
xxvii
MatthewAnnenberg
Matthew Annenberg is the Head of Multi-Asset Advisors at Principal Global Investors.
Matthew joined the firm in 2012. Prior to his current role, Matthew served as a Managing
Director at K2 Advisors, where he analysed Macro and Currency managers in a Fund-ofFunds setting. Prior to K2, Matthew ran Financial Markets Advisory for the Americas at
ABN AMRO Bank, assisting corporate and institutional clients with a range of issues around
funding, hedging and investment strategies. He received a bachelors degree in Economics
from Harvard College. Matthew holds the Chartered Financial Analyst designation and is
a member of NYSSA.
MichaelBarrow
Michael Barrow is Director for Asian Development Banks (ADB) private sector infrastructure
operations including public-private partnerships in South Asia, the Central Asian Republics
and the Caucuses. He joined ADB in July 2003, prior to which he worked for the Deutsche
Bank group over the course of 15 years in London, Tokyo and Singapore, lastly as both
Director of Project Finance and of Transportation. He was also Senior Vice President in the
Structured Finance Department of Sumitomo Mitsui Banking Corp. in Singapore handling
project financing. Mr Barrow has had extensive experience in project financing, PPPs,
privatisation advisory, and corporate restructuring in Asia, Eastern Europe and the Middle
East, and has covered most sectors including water, power, oil and gas, transportation,
telecommunications and manufacturing.
YesimBezen
Yesim Bezen is a finance and projects partner at Bezen & Partners. She is a qualified solicitor
(England & Wales). She was employed by the London office of a magic circle law firm
from 2001 to 2007 where she advised clients on banking, asset finance and project finance
transactions until co-founding Bezen & Partners. She has extensive experience of finance and
projects work both in Turkey and abroad. She advises banks, finance institutions, international
organisations and sponsors in banking, energy and infrastructure deals.
BOCI-Prudential AssetManagement
BOCI-Prudential Asset Management was jointly established by BOCI Asset Management
Limited (which is a subsidiary company wholly owned by BOC International Holdings
Limited) and Prudential Corporation Holdings Limited in 1999. The company offers a
comprehensive spectrum of investment products, which includes Hong Kong mandatory
provident fund scheme, pension funds, retail unit trusts, exchange traded funds, institutional
mandates and other investment funds. The company also manages discretionary investment
portfolio and provides charity fund management services to both private individuals and
institutional clients. Being one of the major investment managers of MPF schemes, BOCIPrudential Asset Management manages assets for more than 670,000 clients in Hong Kong.
In terms of asset under management on MPF, the company ranks among top three investment
managers in the MPF market with approximately 8% market share. The managed Mandatory
Provident Fund Scheme is one of the Master Trust Schemes engaged by the Government for
the provision of MPF services to its eligible employees. www.boci-pru.com.hk.
xxviii
BartleBull
Bartle Bull, an emerging markets fund manager, is the Portfolio Manager of Iraq Investment
Partners I, the worlds first Iraq-only public securities investment fund. Mr Bull began
his emerging markets investment career at the UKs Jupiter Asset Management, where he
established and ran the groups Latin American investment management operation. Mr Bull
then managed Asian regional equities hedge funds for Jupiter in Hong Kong. He subsequently
worked in Baku, Azerbaijan to establish the first portfolio investment fund for the Caucasus
and Central Asia, until the Russian debt crisis of 1998. In 2000, Mr Bull joined the emerging
markets debt division of Van Eck Global in New York, leaving to focus on Iraq in 2004.
Prior to co-founding Northern Gulf Partners LLC (NGP) with Zaab Sethna in October
2007, he spent three years providing Iraq political analysis to a variety of publications
and broadcast media outlets, including the New York Times, the Wall Street Journal, the
Washington Post, the Financial Times, Fox News, the BBC, NPR and many others. Mr Bull
was presented with a personal Commanders Award by General David Petraeus in 2008 for
the excellence of his Iraq political analysis for various news media and is a member of the
Council on Foreign Relations. He received a BA from Harvard University and an MBA from
Columbia Business School.
AllanConway
Allan Conway has been the Head of Emerging Markets Equities at Schroders in London since
October 2004. Previously, Allan was the Head of Global Emerging Markets for West LB
Asset Management from 1998 and then Chief Executive Office of WestAM (UK) Ltd from
2002. From 1997, he was Head of Global Emerging Markets at LGT Asset Management.
From 1992 to 1997, Allan joined Hermes Investment Management as Head of Overseas
Equities. From 1983 to 1992, Allan moved to Provident Mutual Life Assurance initially as an
Investment Manager and later as Head of Overseas Equities. Allan commenced his investment
career in 1980 when he joined the Occidental International Oil Company as an accountant.
Allan is a Fellow of the Securities Institute (FSI) and a Member of the Institute of
Chartered Accountants. Allan has a BA (Hons) in Economics, York University.
KamalDaswani
Kamal Daswani is Vice President, Corporate Finance at Delta Partners Group. With over nine
years of experience, Kamal has worked in Investment Banking (M&A) in the TMT industry.
He holds an MSc from ESADE in Spain, a CEMS MSc (LSE/ESADE) and an Executive MBA
with distinction from the London Business School. Kamal previously worked for Fairfax and
Millennium Finance Corp. in Dubai and London, and Citigroup Corporate and Investment
Bank in London and Madrid.
Kamal has been involved in M&A, IPOs and private placements in Europe and the
Middle East, and currently focuses on emerging markets, where in the last few years he has
worked on several tower infrastructure transactions in Africa and Asia.
MelanieGilmore
Melanie Gilmore is Vice President of Macquarie Infrastructure & Real Assets and has over
seven years experience in the finance sector and at Macquarie. Melanie has worked across
xxix
Europe and Asia and her current role involves fundraising, product establishment and asset
acquisitions across Asia. Prior to this Melanie worked on asset acquisitions for the Macquarie
European Infrastructure Funds 24 which committed the equivalent of 6 billion of capital
to European infrastructure investments. Prior to working at Macquarie, Melanie worked in
the venture capital sector.
Melanie holds a Master of Mathematics and Physics (Hons) from the University
of London.
MichaelGomez
Michael Gomez is a managing director in the Newport Beach office of PIMCO, a portfolio
manager and co-head of the emerging markets portfolio management team. Prior to joining
PIMCO in 2003, he was responsible for market making and proprietary trading of emerging
market bonds at Goldman Sachs. Prior to that, he spent a year in Colombia serving as a
financial consultant to the Ministry of Finance and Public Credit. Mr Gomez was named one
of the rising stars of mutual funds by Institutional Investor News (2009). He is chairman of
the oversight committee for the Markit GEMX emerging markets indices and also serves on
other committees pertaining to emerging markets. He has 18 years of investment experience
and holds an MBA from the Wharton School of the University of Pennsylvania, where he
also received his undergraduate degree.
AndrewGrant
Andrew Grant is an Assistant Vice President at BNRI, having transferred to the BNRI team
in 2012, after joining Barclays in 2009. Prior to joining, he worked as a consultant at Hewitt
New Bridge Street, specialising in executive remuneration and corporate governance. Andrew
holds a BSc in Law & Chemistry from the University of Bristol.
Baljeet KaurGrewal
Baljeet Kaur Grewal is the Managing Director & Vice Chairman at KFH Research Limited
(KFHR), the Investment Research subsidiary of Kuwait Finance House. In her capacity, Baljeet
heads the Global Economic & Investment Research and Advisory teams at KFHR, the first
Islamic bank worldwide to have a notable research presence in Islamic finance.
Prior to this, Baljeet was the Head, Investment Banking Research at Maybank Group,
Malaysia. Prior to that, she was attached with ABN AMRO Bank and Deutsche Bank,
London, with experiences ranging from Credit Structuring, Loan Syndication and Economic
& Capital Market Research. She has broad experience in investment banking, having
participated in notable Islamic fund raising transactions in Asia & the Middle East; as
well as in strategic planning and execution of investment banking organisational change.
To date, she has undertaken research in Islamic finance with a principle focus on debt
capital markets and Sukuks in emerging markets. She has written and published numerous
articles and papers on Developing Economies & Debt Markets, Islamic Debt Structures and
South East Asian Economies; and has addressed numerous international Islamic conferences
& forums. Since inception, KFH Research Limited has been awarded nine international
awards of research excellence, and is widely regarded as the Best Islamic Finance research
house globally.
xxx
Baljeet has a 1st Class Honours in International Economics from the University of
Hertfordshire and has undertaken extensive research in Development Studies with the London
School of Economics.
She is also the award recipient of the prestigious Sheikh Rashid al-Makhtoum award
for Regional Contribution to Islamic Finance in Asia 2006, as well as accolades honouring
women in Islamic finance.
SteveGross
Steve Gross is Senior Managing Director, Head of Asia-Pacific Business Development,
Macquarie Infrastructure & Real Assets and has over 20 years of experience in the finance
sector and eight years within Macquarie.
Steves current role involves overseeing a team based across Asia-Pacific raising private
equity from Asia-Pacific investors for all global Macquarie Infrastructure and Real Assets
funds, co-investment and direct opportunities as well as structuring new Asia-Pacific based
funds and separate managed accounts (SMAs). This team led the successful fundraising
of MIRAs third Korean infrastructure fund, raised US$770 million for the Macquarie
Everbright Greater China Infrastructure Fund. In addition in Q3 2012, the team closed
the first Philippines infrastructure fund, with commitments of US$625 million the Fund
reaching its hard cap at first close.
Prior to this, Steve led the set up and capital-raising of the Macquarie European
Infrastructure Fund (MEIF) 3 following two years as the Chief Operating Officer (COO) of
the MEIFs with 7.3 billion under management. During his time as COO, the team grew
from 25 to more than 60 staff and capital invested increased to 6.3billion including investment in the largest water and wastewater business in the UK Thames Water.
Steve completed a Bachelor of Commerce with honours at the University of Melbourne,
where his thesis was on the impact of infrastructure spending on private sector expenditure
and holds an executive MBA from London Business School with distinction.
DarjaHabarova
Darja Habarova is a manager with PricewaterhouseCoopers LLP Singapore. Darja has more
than eight years of experience working with various financial institutions. She played a lead
role in many of the projects with key wealth management clients in Asia. Areas covered
include strategy, operations, regulatory compliance and business risk management. Prior to
joining PwC, Darja was working in various front office roles with leading wealth management
players in Switzerland. Darja is a regular contributor of PwCs thought leadership on Wealth
Management, including the 2011 PwC Wealth Management Survey. She also drives the firms
Regional Private Banking Chief Operating Officer Roundtable Series, where players discuss
current industry trends, challenges and opportunities for leaders in the operational function.
Darja holds an MBA from the University of St. Gallen, Switzerland and is a Certified
International Wealth manager (AZEK).
Pr-Ola Hansson
Pr-Ola Hansson is the Markets Leader for the Transaction Advisory Services (TAS) practice
at Ernst & Young (EY) in the EMEIA region (Europe, Middle East, India and Africa). He was
xxxi
previously the Managing Partner for EY TAS in the Nordics region and sits on the Executive
Management Board for the TAS practice globally. Pr-Ola has over 15 years experience as
a transactions adviser and has primarily advised large corporate buyers on complex crossborder transactions. His past clients include Volvo, SKF, Stena, SAAB and EQT. Pr-Ola
holds an MSc in Business Administration from the Stockholm School of Economics and has
a background as an authorised public accountant.
RichardHolloway
Richard Holloway is Managing Director of Millimans life consulting businesses in SE
Asia and India. He has worked on most of the mergers and acquisitions in SE Asia
over the past 16 years and has undertaken several Appointed Actuary roles for direct
insurers and reinsurers in Singapore and Sri Lanka. Richard is well known for his role in
pioneering the insurance consulting market in India and his clients have included many
multi-national insurance groups, domestic insurance companies, private equity funds
and regulators.
SohailJaffer
Sohail Jaffer is a Partner and the Head of International Business Development within
the FWU Group based in Dubai. His main achievements are his success in extending the
groups insurance footprint into several emerging markets, understanding the evolving
demand for individual life insurance, savings and pensions in such high growth markets
especially for Islamic insurance, developing a sustainable value added proposition for
the groups international business, providing his business creativity and industry thought
leadership. Mr Jaffers expertise has been sought by regulators, international service
providers and banks in the Middle East North Africa (MENA) and South-East Asia
regions and he has secured several major bank distribution partners for the group in five
emerging markets.
Before joining the FWU Group in July 1999, he was Senior VP within the International
Mutual Funds Group of Scudder based in London, responsible for international product
development from June 1998 until June 1999. From January 1989 until 1995, he was VP
with Citibank London with the Financial Institutions Group responsible for structured products including alternative investments; then in 1996 joined Citibanks Alternative Investment
Strategies (AIS) Group as Director and was also a member of Citibanks Hedge Funds Policy
and Strategy Committee.
Mr Jaffer was an Audit Partner with the Price Waterhouse practice in Africa from July
1984 until September 1988. He is a UK qualified Certified Accountant (FCCA). He is currently
Regional Advisory Council Member (EMEA) of the Alternative Investment Management
Association (AIMA), was a Council member of AIMA for the period 2001 to September
2008 and past AIMA Chairman for the period 1997 to 2000. He was also a member of
ALFIs Asset Management Advisory Committee and of their Hedge Fund Committee. ALFI
is the Association of the Luxembourg Funds Industry.
Mr Jaffer has edited several Euromoney publications on Alternative Investments, Hedge
Funds, Funds of Hedge Funds, Multi-Manager Funds and six of their Islamic Finance series
(Asset Management, Retail Banking, Insurance, Wealth Management, Investment Banking
xxxii
and Sukuk) and co-edited two editions of Investing in the GCC published by CPI Financial
Books. In 2009, he received the Best Business Leader in Europe accolade given by the
World Finance magazine.
Douglas ClarkJohnson
Douglas Clark Johnson is CEO and Chief Investment Strategist of Codexa Capital. He
formed Codexa Capital in the depths of the subprime crisis to pursue opportunities for
issuers and investors in non-traditional markets. His career-long commitment to emerging
markets in general, and the Muslim world in particular, has led to the firms focus on the
Islamic Crescent.
Johnson is a well-known commentator on emerging-market issues; his work has appeared
in leading financial trade publications as well as in periodic research commentary prepared
for clients of his firm. He has lectured at Effat University in Jeddah and has spoken at
professional conferences in locations as diverse as Chile, South Africa, and Malaysia.
Johnson holds dual masters degrees in finance and international affairs from Columbia
University, with an emphasis on Asia and its capital markets. He earned a bachelors degree
in finance from Georgetown University.
Dr EliotKalter
Dr Eliot Kalter established and is President of E M Strategies, Inc. Eliot also holds the
position of Senior Fellow at the Fletcher School, Tufts University, where he is co-head of
the Sovereign Wealth Fund Initiative. He retired from the International Monetary Fund in
June 2007, as Assistant Director of the Capital Markets Department.
Eliot received his PhD in International Finance from the University of Pennsylvania;
MSc from the London School of Economics; and BA from the University of Cincinnati. His
publications are in the areas of international and local capital markets, public debt management, corporate restructuring, international competitiveness, financial crisis management and
global asset allocation (www.emstrategies.com).
SanketKawatkar
Sanket Kawatkar is the Head of Millimans life insurance consultancy practice in India, and
has previously worked at Watson Wyatt (now Towers Watson) where he grew their life
insurance consulting practice in India, and with the AIG group. With experience of over 17
years, Sanket has consulted with almost all the life insurance companies in India in areas
such as embedded/appraisal valuations, peer reviews of statutory valuations by Appointed
Actuaries, product development and pricing support, strategy development, benchmarking
support, capital efficiency reviews, market reports, market entry and business planning, and
regulatory licensing support. He is a regular speaker at industry forums.
AntoniosKoutsoukis
Antonios Koutsoukis is an analyst at Credit Suisse in the Private Banking Division. His areas
of responsibility include equity strategy and thematic research. Antonios holds an MSc in
Finance from Cass Business School, a BSc in Economics and Economic History from the
London School of Economics and is a CFA charterholder.
xxxiii
KarunaLuthar
Karuna Luthar is a banking professional who has worked in the UAE for over 15 years.
Karuna heads the Middle East office of Elara Capital Plc, where she is responsible for
business development, growth and compliance, and is on the Board of Elaras Singapore
office. Elara Capital is a full service investment bank that offers global fund raise and trading
capabilities to companies and institutional clients through its cross-border presence in London
(headquarters), Mumbai, Singapore, Dubai, New York and Mauritius. Prior to her current
role at Elara, Karuna was Head of Corporate Customer Services at HSBC in Dubai, where
she successfully re-engineered bank practices to simultaneously improve profitability, customer
experience and employee satisfaction. Karuna is a member of the Institute of Chartered
Accountants of India and has a BA (hons) degree in Economics from Delhi University. In
addition to her professional commitments, Karuna enjoys working within communities in
India and Dubai. She is an Assessor with the Mohammed bin Rashid al Maktoum Award
for Business Excellence, an Executive Committee Member for the Dubai Chapter of the
Institute of Chartered Accountants of India, and a Director of the India office of Operation
Eyesight Universal, an organisation that works to eradicate preventable blindness in different
parts of the world.
FrankKwok
Frank Kwok joined Macquarie Group in 1997 and has over 15 years of experience in
infrastructure and infrastructure funds management. Mr Kwok is a member of the investment
committees or boards of a number of Macquarie-managed infrastructure funds in Asia, including
Macquarie State Bank of India Infrastructure Fund, Macquarie International Infrastructure Fund,
Philippine Alliance for Infrastructure and Macquarie Everbright Greater China Infrastructure
Fund. From 2007 to 2010, Mr Kwok was Global Chief Operating Officer of Macquarie
Infrastructure and Real Assets, the division of Macquarie which manages infrastructure and
real assets funds and prior to that role, he was Chief Financial Officer of Macquarie Airports,
a top 50 company listed on the Australian Securities Exchange. Mr Kwok holds a Bachelor of
Economics (Hons) degree and a Bachelor of Laws (Hons) degree from the University ofSydney.
Maria LauraLanzeni
Maria Laura Lanzeni is Head of Emerging Markets, Global Risk Analysis at Deutsche Bank
Research. Her team analyse developments in Emerging Asia, Latin America, Eastern Europe,
Middle East and Africa. Among other topics, the team focus on sovereign risk, banking
sectors, and medium-term economic and political trends in emerging economies. Before
joining Deutsche Bank in 1999, Ms Lanzeni held a senior position at the Inter-American
Development Bank in Washington, DC, and previously worked at the Central Bank of
Argentina as well as in macroeconomic consultancy. She holds graduate degrees in Economics
from the Institute for World Economics at Kiel University, the Di Tella University and the
University of Buenos Aires.
FedericoMembrillera
Federico Membrillera is Managing Partner and Head of Corporate Finance, Delta Partners
Group. With 20 years of telecom advisory experience, Federico has spent the last seven
xxxiv
years focused exclusively on the emerging markets with deep focus in Middle East and
Africa. Federico holds an Economics degree from Barcelona University, and has previously
worked for VC fund Nauta Tech I, DiamondCluster (now Oliver Wyman) and Andersen
Corporate Finance.
Federico has been involved in buy-side mandates for several opportunities in the Middle
East and Africa, including, but not limited to: Iraq, KSA, Syria, Jordan, Lebanon, Kenya,
Tanzania, Rwanda, Namibia, Nigeria, DRC and Mali. He has been advising leading MENA
operators in their tower management strategy and has been lead adviser in tower transactions in Africa for operators, tower companies and financial investors.
ManoojMistry
Manooj Mistry is head of Exchange Traded Products and Institutional Passive, EMEA, for
Deutsche Banks Asset & Wealth Management division. Manooj joined Deutsche Bank in
May 2006 and was part of the team that launched the db X-trackers ETF business in 2007,
which is now the second largest ETF provider in Europe by assets under management. Prior
to Deutsche Bank, Manooj was with Merrill Lynch International in London, where he was
responsible for the development of the LDRS ETFs, the first ETFs to be launched in Europe.
Manooj graduated in Economics and Business Finance from Brunel University.
MarkMobius
Mark Mobius, PhD, Executive Chairman of Templeton Emerging Markets Group, currently
directs analysts based in Templetons 18 emerging markets offices and manages the emerging
markets portfolios. Dr Mobius has spent more than 40 years working in emerging markets
all over the world. He joined Franklin Templeton Investments in 1987 as president of the
Templeton Emerging Markets Fund, Inc. In 1999, he was appointed joint chairman of the
Global Corporate Governance Forum Investor Responsibility Taskforce of the World Bank
and Organization for Economic Cooperation and Development.
He has received many awards including: 50 Most Influential People by Bloomberg
Markets Magazine in 2011 and 2010 Africa Investor Index Series Awards by African
Investor. Dr Mobius was also named by Asiamoney Magazine in 2006 as one of their Top
100 Most Powerful and Influential People.
Dr Mobius earned bachelors and masters degrees from Boston University, and a
Doctor of Philosophy (PhD) in economics and political science from the Massachusetts
Institute of Technology. He is the author of the books Trading with China, The Investors
Guide to Emerging Markets, Mobius on Emerging Market, Passport to Profits, Equities
An Introduction to the Core Concepts, Mutual Funds An Introduction to the Core
Concept, Foreign Exchange An Introduction to the Core Concepts and Mark Mobius
An Illustrated Biography.
IanMorley
Ian Morley is the Chairman of Wentworth Hall Consultancy. He was the founder Chairman
of The Alternative Investment Management Association (AIMA) and was one of the European
pioneers of the Hedge Fund industry. He was assisted in the chapter in this book by Charlene
Jones a student from the London School of Economics.
xxxv
GrayNewman
Gray Newman is Managing Director for Morgan Stanley in New York, which he joined
in 2000. As Chief Economist for Latin America he is in charge of all Latin American
macro-economic research. The Latin American Economics teams research is used by
the fixed income, as well as the FX, equity and investment banking groups within
Morgan Stanley.
Prior to joining Morgan Stanley, Mr Newman was Senior Latin America Economist
at Merrill Lynch through June 2000. Prior to that, Mr Newman was Chief Economist for
Latin America for the Hong Kong Shanghai Bank (HSBC) in New York. Before working
at HSBC, Mr Newman was Senior Economist for Interacciones Casa de Bolsa, a Mexico
City-based brokerage house.
Mr Newman is regularly cited by the financial press on Latin American economic trends.
He was ranked number one as Latin American Economist in the 2012, 2011, 2009, 2008,
2006, 2005, 2004, 2003 and 2002 Institutional Investor polls.
OnurOksan
Onur Oksan joined Bezen & Partners after obtaining a law degree from Galatasaray University
and is currently an associate of the firm. He is a qualified lawyer and a member of the Istanbul
Bar Association. He advises local and international clients on regulatory and compliance issues
with a focus on the energy and infrastructure sector and works closely with the projects and
regulatory partners of the firm.
JustinOng
Justin Ong is a partner with PricewaterhouseCoopers LLP Singapore, and is the
Singapore Asset Management Industry Leader as well as the Asia Pacific Private Banking
Leader. His focus is on serving firms in the asset management and private wealth space,
covering business model and strategy reviews, human capital assessments, performance
improvement reviews, risk assurance and training, among others. He has more than 21
years of experience working in Singapore, London and Luxembourg. Justin is a member
of the Stakeholder Engagement Sub-Committee within the Private Banking Industry
Group, a think-tank comprising senior level private banking executives and co-chaired
by the Monetary Authority of Singapore. Justin has a Bachelor of Economics degree
from Monash University in Australia, and is a full member of the Australian Society
of Certified Practising Accountants as well as a practising member of the Institute of
Certified Public Accountants of Singapore. He also holds the Investment Management
Certificate (IMRO Full Version) issued by the Institute of Investment Management and
Research in UK.
JulianPerlmutter
Julian Perlmutter is a partner in the corporate group at Simmons & Simmons in London.
He is a US securities law specialist, with extensive experience in equity securities and highyield and standard debt securities offerings, with a particular focus on Rule 144A offerings,
leveraged buy-outs, debt restructuring and general SEC compliance. Julian joined Simmons
& Simmons as a corporate partner in 2011. He was previously with another leading
xxxvi
international law firm, where he gained over 10 years of experience working in their New
York, London and Hong Kong offices. Julian has also spent time with the US Securities
and Exchange Commission in Washington, DC and on secondment to Morgan Stanley
in London.
LeenQablawi
Leen Qablawi is an associate in the Dubai office of Latham & Watkins and is a member
of the Corporate Department. Ms Qablawi has a broad range of experience including in
mergers and acquisitions, private equity, investment funds, business restructuring, capital
markets and all general corporate transactional work.
CharlesRobertson
Charles Robertson, a leading emerging markets specialist, is Renaissance Capitals Global
Chief Economist and Head of the Firms Macro-strategy Unit. Mr Robertson covers the
global economic themes having the greatest impact on emerging markets.
Over the past decade, the scope of Mr Robertsons work has covered, among other topics:
quantifying political risk in emerging markets; how the retirement age rising to 67 reflects
deep-rooted problems in the West and great opportunities in emerging markets; the revolutionary nature of growth in countries with non-democratic governments; the fact that Africas
economies are now returning some of the highest growth rates on Earth, and how this trend
is set to play out; the impact of terrorism and natural disasters on economies; the effects
of falling agricultural stocks on food prices and inflation; and how emerging-markets banks
may have the best growth potential over the coming years.
Mr Robertson is the lead author of The Fastest billion: The Story Behind Africas
Economic Revolution (www.fastestbillion.com).
Mr Robertson was ranked the number-one economics and macro analyst for emerging
Europe, the Middle East and Africa in the Extel survey in 2007, 2008, 2009 and 2010.
In addition, the team he led was ranked the best macro team in Extels 2010 survey of
equity investors.
Mr Robertson graduated from the London School of Economics in 1993, and worked
at a UK parliamentary defence think-tank and a research boutique until joining the financial
services industry in 1998.
LakhbirSandhu
Lakhbir Sandhu is a Director at BNRI, having joined the team in 2008. Prior to joining
Barclays, he was an Associate in the investment banking division at Goldman Sachs (2004
2008), where he worked on M&A and financing transactions for large-cap UK clients
including Diageo, Yell, HSBC, and Shire. Previously he was an investment research analyst
at Goldman Sachs (20012003). Lakhbir is a CFA holder (since 2006).
Lakhbir holds a BSc in Management Sciences from the London School of Economics.
ClaireSchaffnit-Chatterjee
Claire Schaffnit-Chatterjee is Senior Analyst at Deutsche Bank Research, responsible for
sovereign ratings in sub-Saharan Africa and investigating trends in the areas of food/agriculture
xxxvii
(supply/demand, food prices, sustainability, climate change, risk management), gender and
consumption. Her views are regularly sought after by private sector, industry associations,
various governments (all levels), experts and NGOs. Prior to joining Deutsche Bank Research
in 2006, Claire worked for consulting companies (latest as a manager at Accenture, StrategyFinancial Services) and in academic research. Claire has a PhD in engineering and applied
mathematics from the University of Toronto and an engineering degree from the University
of Technology of Compigne, France.
PatrickSchena
Patrick Schena is Adjunct Assistant Professor of International Business Relations at the
Fletcher School, Tufts University, where he is also Senior Fellow of the Center for Emerging
Market Enterprises and Co-Head of the Sovereign Wealth Fund Initiative. Dr Schena has
30years experience in finance, operations, and technology management focused on investment
management. He was formerly a Principal, leading delivery of the Investment Management
Services at a Genpact-Headstrong Corp., a global provider of outsourcing services. He has
participated in or cofounded two companies providing technology and operations services
to investment managers. He holds a PhD from the Fletcher School, Tufts University and
additional graduate degrees from The Fletcher School, and Boston College.
Kai-NiklasSchneider
Kai-Niklas Schneider is head of Clifford Chances Funds and Investment Management Practice
in Singapore and the Middle East. He focuses on investment funds, joint ventures and private
equity. He regularly advises sponsors on accessing the US market as well as on regional
licensing and securities laws. Mr Schneider is the Chair of the Regulatory Committee of the
Gulf Bond and Sukuk Association. He received a BA from American University, a JD from
University of Baltimore and an LLM from Georgetown University.
ZaabSethna
Zaab Sethna is Head of Baghdad Office, Northern Gulf Partners LLC and has been
working closely with Iraqs leading political parties, business families, and entrepreneurs
since 2003. Based in Baghdad for the last 10 years, he worked for the Government of
Iraq on financial, trade, and energy policies from 2003 to 2007. Since then, Mr Sethna
has represented a number of international companies involved in Iraqi oil and gas,
banking, insurance, aviation, and construction projects among others. His assignments
in Iraq have included: acting as strategic business adviser to Iraqs leading bank; public
affairs and government relations consultancy for the worlds largest insurance group;
business development and government relations for various international oil companies;
market entry advice for a Fortune 500 telecoms equipment maker; an in-depth study
of the Iraqi oil sector for a European market researcher; and strategic advisory and
relationship management for one of the worlds leading alternative-investment managers.
Mr Sethna began his career with the United Nations in Brazil and also worked at
the Sawyer/Miller Group in New York and the Rendon Group in Washington, DC
and London. He received a BA from Georgetown University and an MIA from
Columbia University.
xxxviii
MebSomani
Meb Somani is a Managing Director at BNRI whose deals with BNRI include CEOC, Nio
Petroleum, Hydra Energy, Tulip Oil, Third Energy and PetroGranada.
Meb joined the BNRI team in early 2009. Previously he was Head of Oil and Gas
Investments at Actis (20062008), a leading private equity investor in emerging markets. Prior
to that, he was a Managing Director at Harrison Lovegrove (20012006), where he advised
on acquisitions and divestments around the world valued at several billion dollars. Before
that he spent 20 years with Shell and Texaco in senior petroleum engineering, commercial
and asset management roles based in Europe, Asia and the Middle East.
Meb is a Chartered Petroleum Engineer, a member of the Institute of Directors and several
industry associations. He holds a First Class Honours degree in Engineering from the Royal
School of Mines, Imperial College London and an MBA from Henley Management College.
PiersSummerfield
Piers Summerfield is a partner in the capital markets group at Simmons & Simmons in
London. Piers has significant experience in international capital markets work, both equity
and debt, with a particular focus in recent years on equity-linked transactions. His experience
has included advising issuers and underwriters on a wide range of debt and equity capital
markets work including straight bonds, convertible and exchangeable bonds, Euro Medium
Term Note Programmes and Euro Commercial Paper Programmes, GDRs and liability
management transactions. He has covered a broad range of jurisdictions in his experience,
including most parts of Europe, the Middle East, South Africa, Russia, Ukraine, Kazakhstan,
Japan, Australia and Canada.
Piers joined the Simmons & Simmons London office as a capital markets partner in
2012. He was previously with another leading international law firm, where he gained over
12 years of experience working in their London, Paris and So Paulo offices. He has also
spent time on secondment to a major international bank in London.
VictorSunyer
Victor Sunyer is Director, Corporate Finance at Delta Partners Group. With more than 11
years of professional services experience, Victor has worked in investment banking (M&A)
and strategic management consulting, focused on the TMT industry. He holds an MSc from
ESADE in Spain and an MBA from INSEAD, and previously worked for UBS Investment
Bank in London, and DiamondCluster (now Oliver Wyman) in Europe and the MiddleEast.
Victor has been involved in several M&A transactions and fundraisings in Europe and
the Middle East, and currently focuses on large telecom groups in emerging markets.
ErtuncTmen
Ertunc Tmen, CFA, is the Executive VP of Marketing in Ak Asset Management. Previously
he worked as Senior VP in charge of Affluent Banking & Liability Products in Akbank.
He was the CIO of Equity and Balanced Funds of Ak Asset Management between 2006 to
2011, managing the Discretionary Portfolio Management, Structured Products Businesses
and the Research Department. He worked in Garanti Asset Management in strategist, buy
side analyst and fund manager roles between 2000 and 2006. He received his BS in Civil
xxxix
Engineering from Istanbul Technical University in 1994 and MBA from Bilkent University
in 1997.
DavidWickham
David Wickham is a Director of Global Emerging Markets & Frontier Markets with HSBC
Global Asset Management where he is responsible for leading the promotion of the companys
global emerging and frontier markets equity capabilities. He is also a Fellow of the Brookings
Institution and an Associate Fellow (Adjunct Professor) of the University of Oxfords Sad
Business School.
Prior to joining HSBC, David was employed as a Director and Acting Head of
International Partnership Investments with Invesco Asset Management where he managed
the companys international private equity investment program and raised capital from institutional investors. Throughout his tenure at Invesco, David was an advisory board member
of a number of leading private equity companies. He held a similar position prior to this at
Insight Investment (now part of BNY Mellon Asset Management) where he was responsible
for sourcing, analysing, approving, and actively monitoring investments in American and
European venture capital and private equity partnerships.
David holds a Masters degree in International Relations from the University of Cambridge
and an MBA with Distinction from the University of Oxford, in addition to postgraduate
and undergraduate degrees gained in Sydney and Melbourne, and has held a fellowship with
the Oxford University Foreign Service Programme at the Oxford Department of International
Development. In addition, he is a Fellow of the Chartered Institute for Securities & Investment
and the Royal Asiatic Society, an Associate of the International Institute for Strategic Studies,
and a Member of the CFA Institute and CFA Society of the United Kingdom.
ClaireWilby
Claire Wilby is in-house legal counsel at a project company developing a Southern Corridor
gas pipeline. She is a qualified solicitor (England & Wales). Claire trained at a magic circle
firm in London with secondments to Milan and Frankfurt and has since also lived and
worked in the Middle East and the US. She has significant experience in large cross-border
transactions with a focus on energy and infrastructure across developed and emerging markets.
Claire is currently based in Austria.
xl

Guide To Investing in Emerging and Frontier Markets

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Guide To Investing in Emerging and Frontier Markets

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Investing in Emerging and FrontierMarkets

Investing in Emerging and FrontierMarkets

The growing weight and influence of frontier markets

The outlook for emerging and frontier markets

The role of emerging markets sovereign wealth funds

The importance of micro, small and medium enterprises in emerging markets

The regionalisation of emerging debt and equity capital markets

Risks and return expectations for emerging and frontier markets

Looking beyond external emerging market debt

Market regulation and supervision in emerging and frontier markets

Growing power of emerging market titans

Private equity in growth markets: changing patterns, emerging trends

Institutional investor goals

Doing valuations in emerging markets

Family businesses in emerging markets

Growth of Islamic finance in emerging and frontier markets

Verging on emerging: the reasons for surging investor interest in global

Alternative investment landscape in emerging and frontier markets

Wealth management in emerging and frontier markets

Insurance in emerging markets

Insurance markets in India and Indonesia

Project finance in Asian emerging and frontier markets

Infrastructure funds in emerging and frontier markets

Oil and gas in emerging and frontier markets

Renewable energy in emerging markets

Regulatory and legislative framework

Telecom tower transactions in emerging markets

Huge potential for consumption

Spotlight on Iraq: the worlds fastest growing major economy

Harnessing the potential of the middle class

Rising capitalisation and increased diversification

Emerging market debt

A broader investor base

Risks in emerging and frontier markets

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The growing weight and influence of frontier markets

The outlook for emerging and frontier markets

The role of emerging markets sovereign wealth funds

The importance of micro, small and medium enterprises in emerging markets

The regionalisation of emerging debt and equity capital markets

Risks and return expectations for emerging and frontier markets

Looking beyond external emerging market debt

Market regulation and supervision in emerging and frontier markets

Growing power of emerging market titans

Private equity in growth markets: changing patterns, emerging trends

Institutional investor goals

Doing valuations in emerging markets

Family businesses in emerging markets

Growth of Islamic finance in emerging and frontier markets

Alternative investment landscape in emerging and frontier markets

Wealth management in emerging and frontier markets

Insurance in emerging markets

Insurance markets in India and Indonesia

Project finance in Asian emerging and frontier markets

Infrastructure funds in emerging and frontier markets

Oil and gas in emerging and frontier markets

Renewable energy in emerging markets

Regulatory and legislative framework

Telecom tower transactions in emerging markets

Huge potential for consumption

Spotlight on Iraq: the worlds fastest growing major economy