, head of emerging markets at BNP Paribas Investment Partners, discusses her firm’s core philosophy and investment strategies.
How does BNP Paribas Investment Partners approach emerging markets?
We firmly believe that consistent performance in emerging markets can only be achieved by having investment professionals based in those markets. Because our business model is not only to cover global clients, but most importantly to grow and service our domestic clients based in those jurisdictions, our business philosophy is much more locally focused.
How have emerging markets changed?
Emerging markets in the past had many similarities: poor foreign exchange reserves, large external debt, and some of the currencies were pegged to the dollar. Their debt was in dollars, there were high levels of inflation and their monetary and fiscal policies were poor, all of which translated into multiple crises. However, various countries have implemented reforms, such as de-pegging their currency from the dollar, deleveraging from dollar debt into local currencies and they were benefiting from growth. The search for yield brought international inflows and started to build foreign exchange reserves. Nowadays some emerging economies are stronger than their European counterparts.
What is the most widely held misconception about emerging markets?
That all emerging markets are the same. Nothing could be further from the truth, and this is even more the case these days. The international outflows from emerging markets that took place during recent years is largely attributed to investors treating all emerging markets in the same way. Just as there are emerging markets that should be avoided, there are also emerging markets that offer great value at present. In order to really understand emerging markets, you need to be on the ground
Which emerging market region is the most attractive?
The growth of Asian economies, even with a Chinese slowdown, will still be around 4.5%; you don’t have that level of growth in the Americas or Europe. If you need to invest, our view is Asia offers favourable, risk-adjusted returns.
What separates BNP Paribas Investment Partners from its international competitors?
We are in 16 countries and have the largest investment footprint on the ground of any asset manager covering emerging markets. We believe it is essential to be on the ground to bring value to clients.
At BNP Paribas Investment Partners, we adopt a three-dimensional approach. Selling local products to local clients, that’s the core of our business, and from there we can export products to international clients. The third dimension is to import global products such as European equities, for instance, into local emerging markets. Many global players only offer one of these dimensions, which makes them very vulnerable to short-term flows. Our asset base has been steadily growing over the past years as a result of the diversity of the business.
What’s the strategy going forward?
We will continue our strategy of building a strong domestic client base relying on high-quality local investment teams. This will enable us to be in an excellent position to capture the double-digit growth of local ‘investment savings’ through the distribution of our global products when some of these markets will open up. In addition, we will continue to offer our on-the-ground emerging markets expertise to global investors. After the past years of international investors withdrawing money from the developing world, we see them increasingly acknowledging the current opportunities in emerging markets.
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